Electric vehicles (EV's) are here to stay and are surging in popularity, so EV ETFs are also emerging to fill that thematic fund demand. Below we'll explore the best electric vehicles ETFs to capture this narrow group of stocks in 2024.
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Introduction – Why Electric Vehicles ETFs?
With electric car sales skyrocketing, electric vehicles stocks have been outpacing the broader stock market. Tax incentives for EV owners, stricter emissions standards, government subsidies, charging station rollouts, more efficient battery technology, and a shift away from reliance on fossil fuels will accelerate this adoption of more environmentally sustainable transport.
Analysts doubted Tesla – and the EV market in general – initially, but the company has seen astronomical growth, both in its vehicle sales and its share price. Newcomer Rivian is seeing similar growth out the gate. ARK Invest expects EV sales to reach 37 million by 2024, as battery power becomes cheaper and more efficient, making electric cars more accessible. They state: “According to Wright’s Law, for every cumulative doubling of units produced, battery cell costs will fall by 18%…These cost declines are critical to reaching price parity with gas-powered vehicles, as the largest cost component of an EV is its battery.”
Bloomberg also assembled some impressive EV outlook stats here. Here are a few nuggets:
- “EVs hit 10% of global passenger vehicle sales, rising to 28% in 2030 and 58% in 2040.”
- “Price parity between EVs and internal combustion vehicles is reached by the mid-2020s in most segments.”
- “Nearly 60% of U.S. households have two or more cars – and many have the ability to install home charging – making them ideal adopters as EV economics, range and recharging options continue to improve.”
The Biden Administration in the U.S. have also explicitly stated the goal of building 550,000 EV charging stations over the next decade, as well as wanting an all-electric federal vehicle fleet. In November 2021, an infrastructure bill was passed providing huge tax credits for EV buyers in the U.S.
Electric car ETFs eliminate the need for investors to try to analyze and pick winners out of the myriad of choices of EV stocks. Some are small startups. Others are blue chip automakers committed to electrifying their product offering. Thematic EV ETFs provide broad exposure to the segment to capture the success of any of the rising stars, such as Tesla, as well as the technology going into these vehicles. Below we'll explore the best electric car ETFs.
The 5 Best EV ETFs
Below are the 5 best electric vehicles ETFs to access the market. Most also incidentally provide exposure to autonomous vehicles (AVs).
DRIV – Global X Autonomous & Electric Vehicles ETF
The Global X Autonomous & Electric Vehicles ETF (DRIV) is one of the most popular electric cars ETFs, with nearly $1 billion in assets. Global X has a solid track record for thematic ETFs such as this one. DRIV delivers global exposure to all aspects of the EV manufacturing process, capturing firms involved in EV components, technology, development, and manufacturing.
Investors should note that DRIV provides comparatively more exposure to EV and AV technology (fuel cells, drivetrains, sensors, batteries, mapping technology, etc.) than pure EV exposure per se. Examples of large holdings include Google, chipmaker Intel, software company Microsoft, etc. That said, familiar EV names like Tesla and Toyota are still in the top 10 holdings.
DRIV caps any individual holding at about 4%, providing roughly equal weighting across its 75 holdings. This fund has an expense ratio of 0.68%.
IDRV – iShares Self-Driving EV and Tech ETF
Unlike the name suggests, the iShares Self-Driving EV and Tech ETF (IDRV) does not solely focus on self-driving EVs. It is very similar to DRIV above but is cheaper and more diversified, with about 100 holdings at any given time and an expense ratio of 0.47%. It's also newer; the fund was incepted in mid-2019 and has amassed a little over $300 million in assets.
Similar to DRIV, IDRV's holdings provide global access to autonomous and electric vehicle manufacturers, driving technologies companies, EV battery producers, EV battery materials producers, and charging and components producers.
HAIL – SPDR S&P Kensho Smart Mobility ETF
HAIL is a broader futuristic transportation ETF from SPDR, providing exposure to “the areas of autonomous and connected vehicle technology, drones and drone technologies used for commercial and civilian applications, and advanced transportation tracking and transport optimization systems.”
The fund uses an equal weighting methodology and has one of the lowest fees in this space at 0.45%. Unlike the previous funds, HAIL's 60 holdings end up being pretty heavily concentrated in the United States at about 82%.
KARS – KraneShares Electric Vehicles & Future Mobility ETF
KARS provides exposure to companies engaged in electric vehicle production, autonomous driving, shared mobility, lithium and/or copper production, batteries, hydrogen fuel cell manufacturing, or electric infrastructure. While this focus is similar to DRIV from Global X, KARS is much more of a pure EV play, with less weight on AVs.
KraneShares has proven competency in Chinese stocks, and that shows here, as 20% of KARS's holdings are Chinese companies. KARS has 60 holdings, an AUM of about $180 million, and an expense ratio of 0.70%. KARS is likely the most targeted EV fund on this list in terms of actual EV manufacturers.
LIT – Global X Lithium & Battery Tech ETF
Another fund from Global X is LIT, which more narrowly targets lithium miners and battery producers. This is basically a broad play on the lithium industry, only one application of which is electric vehicles.
Interestingly, LIT has been around since 2010, and is the most popular fund on this list with nearly $3 billion in assets. It is also the most expensive, with a fee of 0.75%.
LIT's holdings are mostly small, foreign companies that you've probably never heard of, though it is exposed for 20% to the United States, and Tesla is in its top 10 holdings. Other top 10 holdings include Panasonic, LG, and Samsung. In fact, those 4 comprise over 1/4 of LIT's holdings by weight.
Since LIT is a play on the lithium industry, its performance is not very highly correlated with that of the above EV-focused ETFs.
Where to Buy These EV ETFs
All these electric vehicles ETFs should be available at any major broker. My choice is M1 Finance. The broker has zero trade commissions and zero account fees, and offers fractional shares, dynamic rebalancing, and a modern, user-friendly interface and mobile app. I wrote a comprehensive review of M1 Finance here.
Disclaimer: While I love diving into investing-related data and playing around with backtests, this is not financial advice, investing advice, or tax advice. The information on this website is for informational, educational, and entertainment purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. I always attempt to ensure the accuracy of information presented but that accuracy cannot be guaranteed. Do your own due diligence. I mention M1 Finance a lot around here. M1 does not provide investment advice, and this is not an offer or solicitation of an offer, or advice to buy or sell any security, and you are encouraged to consult your personal investment, legal, and tax advisors. All examples above are hypothetical, do not reflect any specific investments, are for informational purposes only, and should not be considered an offer to buy or sell any products. All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future results. Opinions are my own and do not represent those of other parties mentioned. Read my lengthier disclaimer here.
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