Electric vehicle ETFs are one the most common ways investors can gain exposure to EV companies. The electric vehicle (EV) buzz is still alive, and EV stocks are an attractive option despite the semiconductor supply shortage, rising inflation, and sky-high lithium prices. The recent tech stock sell-off has pulled down prices of many EV and EV-related stocks. But these short-term challenges will not affect the long-term EV growth opportunity.
Vehicles are the biggest CO2 emitters accounting for 29% of the total carbon emissions. The world’s largest auto markets – China, Europe, and the United States – are hell-bent on achieving zero-carbon emissions by 2050. Hence, these governments have laid out support and investment to increase EV adoption. Some states are even imposing an outright ban on gas-powered vehicles. This will ensure EV demand is there. But the challenge is around EV supply.
All automakers, tech giants, auto component suppliers, software providers, and battery producers are vying for a piece of the EV revolution. It is difficult to say which company will become a market leader. Then best way to ride the EV wave is to get exposure to all related stocks with EV ETFs.
EVs have not yet been profitable for automakers other than Tesla, making them risky. Hence, there is no pure-play ETF that only invests in EV makers. There are broad and narrow-focused ETFs that invest in the entire EV supply chain, giving you a wholesome exposure to EVs. Here are the top five ETFs with some of the lowest expense ratios and exposure to the most promising EV-related companies.
Electric Vehicle ETFs List:
- Global X Autonomous & Electric Vehicles ETF (DRIV)
- iShares Self-Driving EV and Tech ETF (IDRV)
- Global X Lithium & Battery Tech ETF (LIT)
- KraneShares Electric Vehicles & Future Mobility ETF (KARS)
- Simplify Volt RoboCar Disruption and Tech ETF (VCAR)
Global X Autonomous & Electric Vehicles ETF
Founded in April 2018, the DRIV is a passively managed ETF with a broad focus on the EV supply chain. It invests in 76 stocks ranging from semiconductors, auto components, batteries, and software for EVs and AVs (autonomous vehicles). With $1.19 billion in assets under management (AUM), it is the second-largest ETF on my list. It tracks the Solactive Autonomous & Electric Vehicles Index and has posted 71.5% returns since inception.
This smartly worded ETF has 59% holdings in US stocks. Its top five holdings, Apple, Alphabet, Tesla, Nvidia and Intel, account for 17% of the AUM. These companies will not only give you exposure to EVs but AVs and other tech waves like AI (artificial intelligence) and IoT (internet of things). A 0.68% expense ratio makes this ETF a good bargain to ride the EV and tech trends.
iShares Self-Driving EV and Tech ETF
Founded in April 2019, iShares came up with an EV ETF and named it IDRV. IDRIV is half the size of DRIV, with $526 million AUM, but its returns have caught up, growing 67.6% since inception.
It tracks the NYSE FactSet Global Autonomous Driving and Electric Vehicle Index and has 115 holdings. That gives it a broader focus beyond AV and EV into tech. Hence, you can see non-automotive tech names like Qualcomm and Advanced Micro Devices in its portfolio. The ETF has 52% exposure to US stocks and over 10% each in German and Japanese stocks as automakers like Mercedes-Benz and Toyota are from there.
IDRV is the cheapest ETF on my list, with a 0.47% expense ratio. This means you get a higher return after deductions.
Global X Lithium & Battery Tech ETF
Founded in July 2010, LIT is the oldest ETF on the list and hence the largest, with an AUM of $4.82 billion. This passively managed ETF tracks the Solactive Global Lithium Index. Unlike the other two, LIT is a narrowly focused ETF with 41 holdings in all lithium-related stocks like battery makers, miners and refiners.
This ETF will give you indirect exposure to EV sales and direct exposure to high lithium prices. Other than Tesla and Samsung, its top holdings are not the names you hear often. For instance, it has invested 11% assets in lithium, bromine, and catalyst solution producer Albemarle.
As LIT has time by its side, it has the highest returns of 131.85% since inception. Even if I take its returns since April 2018, the ETF has surged 120%, thanks to rising lithium prices. However, it has a high expense ratio of 0.75%.
KraneShares Electric Vehicles & Future Mobility ETF
Another smartly worded ETF, the KARS, was founded in January 2018 and got a five-star rating from Morningstar. Its broadly focussed portfolio of 74 stocks covers everything from lithium mining to battery to vehicle production. It has delivered 48% returns since its inception. The ETF tracks the Bloomberg Electric Vehicles Index and has an AUM of $281 million.
Its two largest holdings are Tesla and Chinese battery maker CATL. Among other top holdings are chip makers Analog Devices and Infineon Technologies. It has an expense ratio of 0.70% which is marginal for a passively managed ETF.
Simplify Volt RoboCar Disruption and Tech ETF
The last ETF on my EV list is VCAR, the youngest one founded in December 2020. Unlike the other four, this ETF is actively managed and carries an expense ratio of 0.95%. It has over 40% assets in Tesla and tech companies like Nvidia and Amazon. The company uses around 12% assets in options to enhance the upside and protect the downside.
The inception date of the ETF gives it a disadvantage as most tech and auto stocks were trading higher at that point. It surged 41% in the 2021 rally, but also dipped in the tech sell-off. That explains its 0.95% returns since inception. However, it has significant growth potential in the future. Because of the high expense ratio and weak returns, I have put it in the fifth position.
Electric Vehicle ETFs: Final Takeaway
The ongoing Russia-Ukraine war has put Europe and the US under pressure to reduce dependence on gasoline, adding yet another caveat for EV adoption. The above five ETFs are a smarter way to monetize the EV and tech wave as electric vehicle go mainstream.
Disclosure: The author holds no position mentioned in this article. Freedom Stocks has a disclosure policy.