Buy a basket of EV stocks instead of trying to pick individual winners and losers
- An electric vehicle ETF gives you exposure to all the best stocks in the industry while minimizing the impact of the inevitable losers.
- KraneShares Electric Vehicles & Future Mobility Index ETF (KARS): This ETF is focused on the EV manufacturers, their component makers, and the future of mobility.
- Global X Autonomous & Electric Vehicles ETF (DRIV): A wide-ranging ETF exploring EVs, AVs, and anything that might touch on the industry.
- iShares Self-Driving EV and Tech ETF (IDRV): This ETF looks at the full spectrum of the EV market, though focuses heavily on the automakers.
Going green is difficult and expensive, yet demand for electric vehicles (EVs) is large and growing. Tesla (NASDAQ:TSLA) proved the sector can be profitable. Its Model Y recently claimed the title of being the biggest-selling car in the world. It’s the first time an EV wore that crown. This has led to the rise of electric vehicle ETFs.
Yet competition is stiff. All the major gas-powered carmakers are making their own models and global competition is intense. China is well on its way towards being a worldwide competitive threat. For the first time in more than a year, Tesla’s global deliveries to customers fell sequentially. They dropped to 435,059 vehicles, a 6.7% decline.
Maybe Tesla will be the winning investment 10 years down the road. Or it could be China’s Xpeng (NYSE:XPEV). Maybe both. Perhaps neither. Picking winners and losers in this oft-changing sector may not be the best way to approach investing in it. For every Tesla there is a Nikola (NASDAQ:NKLA) and Lordstown Motors (OTCMKTS:RIDEQ).
While the overall industry trend is up, individual stocks will be hit or miss. A better way to play the sector is through exchange-traded funds (ETFs). Investing in a basket of stocks provides exposure to the entire EV market while minimizing the impact of any one stock flaming out.
Below are three top electric vehicle ETFs you may want to consider buying instead.
KraneShares Electric Vehicles & Future Mobility Index ETF (KARS)
If you want an ETF that is narrowly focused solely on companies making EVs and their components, then you will want to check out KraneShares Electric Vehicles & Future Mobility Index ETF (NYSE:KARS). You’re going to get Tesla, Xpeng, and Rivian Automotive (NASDAQ:RIVN) in your portfolio, but also smart vehicle auto parts maker Aptiv (NASDAQ:APTV) and lithium producer Albemarle (NYSE:ALB), amongst others.
KraneShares ETF is benchmarked to the Bloomberg Electric Vehicles Index. That means it is looking for results that emulate the price and performance of companies involved in the production of the vehicles, their components, and the future of mobility.
It’s also going to give you exposure to stocks you might not otherwise be able to invest in. For example, one of the ETF’s top five holdings is Contemporary Amperex Technology, also known as CATL, which trades on China exchanges. It is a major supplier of lithium batteries to Tesla. China, of course, is also the world’s largest market for EVs. The stock represents 3.96% of KraneShares net assets, its fourth largest holding.
The ETF has an expense ratio of 0.72% and total assets of $162.8 million. There are nearly 70 holdings in the portfolio.
Global X Autonomous & Electric Vehicles ETF (DRIV)
While Global X Autonomous & Electric Vehicles ETF (NYSE:DRIV) will give you access to many of the most important EV stocks on the market, the ETF also leans heavily into the autonomous vehicle market. So beyond the usual EV suspects, you also find Alphabet (NASDAQ:GOOG NASDAQ:GOOGL), which is the largest holding in its portfolio, and Qualcomm (NASDAQ:QCOM).
Alphabet, of course, owns Waymo, the internet search king’s self-driving car project. For their own part, automakers have embraced Qualcomm’s Snapdragon Ride platforms for their scalable AV and advanced driver-assistance systems.
Global X Autonomous & Electric Vehicles ETF benchmarks to the Solactive Autonomous & Electric Vehicles Index. Its top three holdings are Alphabet, Toyota (NYSE:TM), and Nvidia (NASDAQ:NVDA). You will find almost all major car manufacturers amongst its holdings, along with some of the biggest tech stocks on the market. There are a number of chip stocks, battery makers, and component companies for EVs and AVs thrown in for good measure. It’s a broad-based ETF touching on all aspects of the EV and AV industries.
The ETF has an expense ratio of 0.68%, 75 total holdings, and net assets worth $746.7 million.
iShares Self-Driving EV and Tech ETF (IDRV)
In a similar vein is iShares Self-Driving EV and Tech ETF (NYSE:IDRV). It is also skewed toward the autonomous vehicle market, which of necessity includes a lot of EVs as well. It tracks the NYSEA FactSet Global Autonomous Driving and Electric Vehicle Index and touts it brings investors exposure to global stocks along the full value chain of the AV and EV industries. The ETF spans both sectors and geographical boundaries.
For that reason, you will find Xpeng is its largest holding, but Li Auto (NASDAQ:LI) and Byd (OTCMKTS:BYDDY) are among its top holdings as well. It is one of the ETFs that’s most focused on the automakers and their parts suppliers. Sure, it has a number of miners, like Pilbara Minerals (OTCMKTS:PILBF) and Allkem (OTCMKTS:OROCF) to provide the industry’s needed lithium, but automakers comprise seven of the top 10 positions.
The ETF had 53 holdings in all and net assets of more than $391.7 million. Its expense ratio is 0.47%. This is why it’s one of those electric vehicle ETFs to consider.
This post originally appeared at InvestorPlace.
On the date of publication, Rich Duprey did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
