Many regulations are set to accelerate the adoption of electric vehicles (EVs) and deliver considerable growth in the industry. But which companies are worth investing in? Read on to find out.
Best EV ETFs
Global X Autonomous & Electric Vehicles ETF (NASDAQ: DRIV)
DRIV is one of the largest EV ETFs in the market, with a net asset value of more than $800 million.
The fund’s investment strategy is well-diversified, spreading across all aspects of the autonomous driving and electric vehicle industry.
This ETF invests in companies involved in EV and autonomous vehicles (AV) development stages.
Among them are software companies, companies involved in electric vehicle production, EV components and materials manufacturers, microchip developers, and more
It’s common for ETFs in this sector to diversify and capture a broader range of the industry.
The Global X Autonomous & Electric Vehicles ETF has had a decent performance since its inception.
The fund has returned an annual average yield of 8.4% to investors. While this isn’t a guarantee of current or future performance, it’s a good sign that the ETF could perform over time.
However, this performance does come at a high cost. The Global X Autonomous & Electric Vehicles ETF has a 0.68% expense ratio.
Related: The 11 Best Electric Car Stocks To Buy Now
The BlackRock ETF focuses primarily on companies involved in developing electric vehicles (EVs) and autonomous vehicles (AVs).
This fund seeks to track the performance of the NYSE FactSet Global Autonomous Driving and Electric Vehicle Index. An index composed of developed and emerging market companies that could benefit from growth and innovation in and around EVs.
The Ishares Self Driving EV and Tech ETF has nearly half a billion dollars in net assets spread out across 135 holdings. An enormous diversification that provides broad exposure to the sector.
The ETF holdings range from microchip companies to car manufacturers and everything in between.
IDVR has one of the cheapest expense ratios on the list, only 0.47%, giving it a competitive edge against its counterparts.
But that’s not all; the average P/E ratio of the fund stands at only 11. A fairly low ratio considering its weight in tech.
Investors looking to invest in ESG funds could find great value in IDVR.
The fund currently boasts a high ESG score of AA. The Ishares Self Driving EV and Tech ETF are then considered to have an environmentally friendly investment objective.
Global X Lithium and Battery Tech ETF (NYSEARCA: LIT)
The EV sector may have picked up steam recently, but LIT investors have capitalized on it since 2010. The Lithium and Battery Tech ETF is one of the oldest in its category.
The fund’s investment objective focuses mostly on EV battery manufacturers and lithium mining operations.
Investors may choose to invest in lithium ETFs as a way to minimize their risk in the EV industry further.
Every EV company needs lithium batteries to power their vehicles. Therefore, It doesn’t matter which brand of EV sells the most vehicles; lithium batteries will always capitalize on the industry as a whole.
LIT has a massive capitalization boasting a whopping $4 billion in net assets. A sum that’s many times larger than other electric vehicles ETFs on this list.
An unusual feature of this ETF is that it’s heavily weighted in its top-holding — Albemarle Corporation (ALB), a North Carolina-based lithium manufacturer. The company makes up over 12% of the ETFs’ 40 holdings.
The EV ETF sets back investors quite a bit by charging an expense fee of 0.75%. However, it does have good past performance data.
Since its inception, the Lithium and Battery Tech ETF has returned an average yearly gain of 8.34% for investors.
It’s important to note that the fund invests heavily in Chinese companies; they comprise 34% of its assets.
This could bear some risk for investors as relations between China and the United States have seen some challenges recently. News has been circulating about the risk of Chinese stocks being delisted in the United States.
On the other hand, investors will need to consider that China has the world’s largest EV market. Therefore, those willing to capture capital gains from the industry may need to consider that risk.
Some of the Chinese companies that make up the ETF include Ganfeng Lithium, Yunnan Energy, and Naura Tech.
SPDR S&P Kensho Smart Mobility ETF (NYSEARCA: HAIL)
HAIL is an electric vehicle ETF with a broader investment objective, focusing on next-generation vehicle technologies.
The fund seeks to track the Kensho Smart Transportation index, which is diversified into the electric vehicles industry.
The Kensho Smart Mobility ETF invests in technologies such as:
- Internet of Vehicles (IoV)
- Autonomous vehicles
- EV Trucks
- Drones
The ETF manages a considerably low amount of assets compared to others in the list, with only $66 million in net assets.
However, the lower capitalization comes in with a lot of savings. Investors can benefit from a relatively cheap expense ratio of only 0.45% and the best P/E on the list of 10.84.
The fund is down over 40% YTD, which is a staggering amount. Yet, while the Kensho Smart Mobility ETF is down considerably, it could present investors with a discounted opportunity to enter the industry.
The KraneShares Electric Vehicle and Future Mobility ETF tracks the Bloomberg Electric Vehicles Index. The index offers investors a narrower focus on the electric vehicles industry.
Unlike other funds in the list, the focus of this ETF does not emphasize other related technologies like IoV or autonomous vehicles (AVs). This could make the ETF an ideal choice for investors looking to focus solely on electric vehicles.
The KraneShares Electric Vehicle and Future Mobility ETF is managed by China International Capital Corporation, a partially state-owned firm.
This is an important risk factor for investors, considering the current geopolitical global environment.
KARS’s portfolio of over 60 EV stocks will set back investors by 0.70% in expenses while delivering an average P/E ratio of 21.
The fund is not as large as others on this list, with only $214 million in assets.
Simplify Volt RoboCar Disruption and Tech ETF (NYSEARCA: VCAR)
VCAR takes an innovative approach to EV investing by focusing mainly on companies that are set to disrupt the EV and AV industry.
The ETF is also unique to others on this list because it employs stock options as part of its investment strategy.
Stock options are a high-risk investment vehicle; however, when properly used, they can provide protection against drawdowns and enhance the upside.
The Simplify Volt RoboCar Disruption and Tech ETF tops the list as the most expensive ETF with an expense ratio of 0.95%.
The fund is considerably small, with only $3 million in net assets.
VCAR is certainly not the best option for investors that are faint of heart. Its options strategy and small net asset value could make this the most volatile option on our list.
Should You Invest in EV ETFs?
As a result of government green incentives, EV ETFs could likely make excellent long-term investments.
Electric vehicles constitute less than 10% of total vehicle sales in the United States. But that’s not the only growth factor the industry has to look forward to, as there are strong reasons to suggest that the EV industry still has plenty of room for growth.
Most notably:
- Tax incentives for EV owners
- Government bans on sales of new gas vehicles
- Stricter emission standards
- Government subsidies
- Battery power becoming more accessible
Analysts suggest that the Global EV market is expected to grow to $400 billion in value through 2028. A nearly three times jump from its 2021 size, a growth that could, in turn, deliver excellent capital returns to investors.
While the industry does have a lot of growth to look forward to, there are some inherent risks that come with it.
Considering the industry is still early in its inception, there is still a lot of uncertainty about which companies will succeed.
Recently, the CEO of Nikola Corp — an EV manufacturer — was recently convicted of defrauding investors. An excellent example of the inherent risk that may come with a young industry.
For this reason, it may be best for investors to mitigate those risks by purchasing an electric vehicle ETF. EV ETFs offer investors a broader approach to capitalize on the industry’s growth.
Where to Buy EV ETFs?
Investing in an EV ETF isn’t much different from investing in other ETF types. There are many ways in which investors can get a hold of an EV ETF, as they are a popular investment option offered by most stock market brokers.
Let’s look into the best options for buying electric vehicle ETFs.
Online Brokers
The easiest and most convenient way to purchase shares of aggressive growth funds is by opening an account with an online stock market broker. This also offers tax-advantage accounts like an IRA that feature attractive benefits.
Most stock market brokers offer commission-free trades, lowering the costs for investment strategies such as fractional share buying and dollar-cost-averaging.
Some great brokers to get started with include:
- Charles Schwab
- Fidelity
- TD Ameritrade
- E*TRADE
- Interactive Brokers
Robo-advisors
Here to disrupt the investment world, digital advisors offer clients intelligent and automated investment options tailored to the goals and needs of every investor.
Popular Robo-advisors offering EV ETFs include:
- Betterment
- Wealthfront
- Ellevest
- M1 Finance
- SoFi Invest
Full-Service Brokers
If you find yourself to be short on time and living on the wealthier side of town you may want to consider using a full-service broker.
Full-service brokers come at a high price but offer many hand-off luxuries for wealthy clients. If you employ a full-service broker, you will be able to contact them about an EV ETF strategy.
Before investing in EV ETFs it’s critical to do your own research and study the fund properly, to ensure that it’s aligned with your needs, as well as seek professional help if you are not sure about the best investment practices.
Final Words
The EV industry has the potential to grow significantly over the next 20 years, which could offer investors a great opportunity for profit.
Buying electric vehicle ETFs could be a clever way to profit from the changes in the transportation sector without selecting individual EV stocks.
Now that you know more about EV ETFs, you may consider adding one (or more) of these funds to your portfolio.
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