Automobile ETFs are becoming increasingly popular as a way to invest in the automotive industry. With these funds, investors can easily diversify their portfolios and get exposure to different parts of the automotive sector.
In this article, we’ll examine the top five car ETFs currently on the market and discuss what sets them apart from the competition.
Best Automobile ETFs
Global X Lithium & Battery Technology ETF (LIT)
The Global X Lithium & Battery Tech ETF is not a dedicated auto ETF, but it is heavily geared toward demand trends in the electric and hybrid vehicle markets.
Furthermore, LIT has staying power. It has been operational for more than nine years and has approximately $515 million in assets under management, which is a good figure for a thematic fund.
While LIT does not have many auto stocks, Tesla is one of its top ten holdings. However, its credibility as an auto ETF stems from the importance of lithium in the production of batteries that power electric vehicles.
The portfolio of about 40 stocks includes lithium miners and battery technology companies. Approximately 16% of assets are held by the top two companies: Charlotte, North Carolina-based lithium giant Albemarle Corp. (ALB) and top Chinese battery firm EVE Energy Co. Ltd. (300014).
However, if you truly believe in the EV revolution, this Global X fund gets you on the ground floor by investing in the power source rather than a specific car manufacturer.
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NASDAQ Global Auto Index Fund (CARZ)
The Nasdaq OMX Global Automobile Index is the index that the First Trust CARZ ETF tracks (QAUTO).
The names you’d expect to see at the top of the index in terms of weighting are all present: Daimler, Honda Motor, Volkswagen, Toyota Motor, and Tesla. The index contains 33 securities and includes companies listed on 11 exchanges in 10 countries.
Eligibility requirements include being classified as an automobile by the Industry Classification Benchmark (ICB), having a minimum market cap of $500 million, a three-month average daily dollar trading volume of $1 million, and a minimum free float of 20%.
The current maximum weight is 8.6% (Daimler), and the lowest weight is 0.06% (UMW). The median and average weights of the portfolio’s securities are 2.9% and 3.0%, respectively. The QAUTO index debuted in February 2011, and the First Trust CARZ ETF debuted in May 2011.
Global X Autonomous & Electric Vehicles ETF (DRIV)
The Global X Autonomous & Electric Vehicles ETF is one of the auto ETFs that is betting on the future industry, which will include autonomous vehicles as well as many more plug-in and hybrid vehicles. To put it another way, DRIV has the potential to be an exciting auto ETF, whereas CARZ, assuming it survives, will most likely be boring.
CARZ member companies include those “involved in the development of autonomous car software and hardware, as well as corporations that manufacture EVs, EV components like lithium batteries, and critical EV materials e.g., lithium and cobalt,” according to Global X.
Importantly, data show that electric vehicle adoption is on the rise.
According to Global X research, “as global auto sales slowed by more than 2% in the first quarter of 2019 when compared to the same period in 2018,” sales of electric vehicles soared by 57%, reaching 496,000 vehicles in quarterly sales.
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With the rise of electric vehicles and autonomous driving technology, investing in Automobile ETFs has become more attractive than ever before.
Depending on their risk tolerance and investment objectives, investors have a wide range of options at their disposal. The iShares Self-Driving EV and Tech ETF (IDRV) is one of the best Automobile ETFs currently available.
The iShares Self-Driving EV and Tech ETF seeks to replicate the investment performance of an index comprised of developed and emerging market companies that may benefit from growth and innovation in and around electric vehicles, battery technologies, and autonomous driving technologies.
IDRV is perhaps the most diverse fund on this list, with nearly 120 components from around the world covering nearly every aspect of the EV revolution.
With such a long list, you’re bound to get some tangential players. At the moment, Irish power management company Eaton Corp. PLC (ETN) and Swiss electrification specialist ABB Ltd are among the top components (ABB).
So, if you want to avoid the usual suspects of US or Chinese EV stocks, this iShares fund is worth considering. Plus, Investing in this fund can help investors gain access to the fast-growing automobile industry while also reducing their risk exposure.
The KraneShares Electric Vehicles & Future Mobility ETF (NYSEARCA: KARS) is an international auto ETF, which makes sense given that some of the world’s largest developing economies are major polluters but are attempting to improve their situation by embracing electric vehicles.
KARS invests in publicly traded companies with significant revenues from electric vehicles, energy storage technologies, autonomous navigation technology, lithium, copper mining, and hydrogen fuel cells.
An index committee selects portfolio inclusion by scraping proposed company filings for thematic key terms and then back-testing the resulting basket. This results in a concentrated portfolio of approximately 32 market-cap-weighted companies, with weights of the top 8 securities capped at 5% and other securities capped at 2.5%. If the number of holdings is less than 32, equal weighting may be used.
KARS tracks its index using representative sampling, which is reconstituted and rebalanced quarterly. The fund previously tracked the Solactive Electric Vehicles and Future Mobility Index until June 16, 2021.
Conclusion
Automobile ETFs are an excellent way to gain exposure to the automotive industry without having to invest in individual stocks. With a variety of options available, investors can choose from a range of vehicles that provide exposure to different parts of the industry.
In this article, we have highlighted five of the best automobile ETFs for investors looking for exposure to the sector. These funds offer diversified portfolios with low fees and strong performance.
By investing in these funds, investors can gain access to a well-diversified portfolio that is designed to track the performance of the global automotive industry.
