Best Electric Vehicles (EV) ETFs
It seems that the verdict is already out. Electric Vehicles (EV) will replace Internal Combustion Engine (ICE) vehicles in time to come. EVs are viewed as more energy efficient, more environmentally friendly and cost less to maintain.
Although EVs get a lot of attention, they are still a relatively small portion of the overall vehicle market, currently estimated at around 6% globally, with penetration higher in China and Europe than in the U.S.
A greater proportion of the cars existing now are ICE vehicles. Over the next 30 to 40 years, that equation is going to flip with EVs making up the vast majority of vehicles on the road as ICE vehicles are faced out and greater proportions of EVs are sold.
Countries like Norway is set to ban sales of new gas-powered cars in 2025, and its adoption is running ahead of schedule. Current estimates show about 80% of cars sold in Norway use EV technology.
China imposed a mandate on automakers requiring that electric vehicles (EVs) make up 40% of all sales by 2030. Due to China accounting for a large proportion of demand, this move will expand the production of EVs and EV batteries enough to bring down the worldwide cost of both.
Over time, as technology is expected to improve, this will bring down overall costs. Battery costs, which make up 30-40% of the cost of an EV, have come down 80% over the last six to seven years and this has fuelled a lot more innovation in that space as people attempt to find new and innovative ways of building batteries in a way that makes them a lot cheaper and makes the car cheaper.
To obtain exposure to EVs, one approach is via an EV themed ETF which will include not only EVs but also companies who are in batteries, other EV components, mining of critical minerals, hydrogen and even in charging stations and autonomous vehicles.
A couple of years ago, we would have said that if one wants to get exposure to this theme, buy an EV ETF as we wouldn’t know who would survive. Now, buying into an EV ETF allows investors to get the broad based exposure required to an important macro trend.
There are also ETFs focusing on other parts of the supply chain such as Battery, Self driving, EV minerals. Here we look at 4 EV focused ETFs.
Best EV ETFs
Some of the most popular and largest EV thematic ETFs are listed in the table below
Here we have 2 US centric ETFs, namely DRIV IDRV, 1 Global ETF (KARS) and 1 Chinese centric ETF.
Comparing the Top 10 holdings across the first 3 ETFs, obviously the one mainstay would be Tesla. Toyota also features on 2 ETFs. FAANG stocks such as Apple and Alphabet also feature on 2 ETFs. Semiconductor themed companies such as Qualcomm and Samsung also feature on 2 ETFs.
Global X Autonomous Electric Vehicles (DRIV)
The Global X Autonomous Electric Vehicles ETF (DRIV) seeks to invest in companies involved in the development of autonomous vehicle technology, electric vehicles (“EVs”), and EV components and materials.
It includes companies involved in the development of autonomous vehicle software and hardware, as well as companies that produce EVs, EV components such as lithium batteries, and critical EV materials such as lithium and cobalt.
This ETF tracks the Solactive Autonomous Electric Vehicles Index which tracks the price movements in shares of companies which are active in the electric vehicles and autonomous driving segments. This particularly includes electric vehicle manufacturers, electric vehicle component producers, companies that mine or produce raw materials that are relevant to the electric vehicle and autonomous vehicle technology segment, companies that build autonomous vehicles, and suppliers of autonomous vehicle technologies.
The top 10 holdings in DRIV as of 31 Jul 2022 are as follows:
The industry and country breakdown are as follows:
As the Global X Autonomous Electric Vehicle ETF is actively managed and aims to track the Solactive Autonomous Electric Vehicles Index, Do also check out the latest developments of the Global X Autonomous Electric Vehicle ETF at their website here before an investment is made.
KraneShares Elecric Vehicles and Future Mobility Index (KARS)
KARS has positions in global companies that operate in all areas of new transportation methods, passenger, and freight, including electric vehicles, autonomous vehicles and shared mobility.
KARS provides exposure to companies that lead the development of vehicle connectivity like Internet of Vehicles (IoV) and Intelligent mobility and to the potential growth brought on by increased demand for lithium-ion battery and non-ferrous metals like lithium due to electric vehicle adoption. It also has access to equities listed in Mainland China, which is currently the world’s largest electric vehicle market.
KARS seeks to measure the performance of the Bloomberg Electric Vehicles Index. The Index is designed to track the performance of companies engaged in the production of electric vehicles and/or their components or engaged in other initiatives that may change the future of mobility. The Index includes issuers engaged in the electric vehicle production, autonomous driving, shared mobility, lithium and/or copper production, lithium-ion/lead acid batteries, hydrogen fuel cell manufacturing and/or electric infrastructure businesses.
Here are the Top 10 holdings in KARS as of 8 Sep 22:
Electric Vehicles are likely to replace ICE vehicles in the long term, supported by longer term government policies across the world, we have shared with you 4 ETFs you can consider if you wish to bet on EVs.
The 2 US centric and 1 Global ETFs are quite varied, with Tesla as the only company present across all 3 ETFs The ETFs also have a certain degree of industry diversification as some chips companies and FAANG companies have also been included.
For investors who are keen on getting exposure to China, a country with a 1.5 billion population and strong government support for EVs, there is also an ETF available that is listed in Hong Kong and traded in both HKD USD.
Investing in EVs
While overall car sales were curbed somewhat in 2022, the road appears to be getting smoother of late—particularly for electric vehicles (EVs). Indeed, global electric car sales sped up 60% last year to surpass 10 million for the first time ever, despite broader car sales headwinds as well as rising battery prices. 1 Most auto market analysts think EVs are on the fast track to accelerate in the years ahead.
Here’s where the EV market stands, and what roadblocks EV investors could face.
EV sales speed up
EVs represented a growing percentage of total car sales last year in the world’s 3 largest auto markets—China (25%), the European Union (20%), and the US (10%). 1 However, they still accounted for a relatively small percentage of total car sales, leaving a lot of room for growth (see Passenger car sales chart).
Passenger car sales
Source: IEA, as of February 28, 2023.
Automakers are clearly anticipating that potential growth in EV share: There are now over 400 electric car models globally (notably, roughly 55% of these models were SUVs, a 40% increase from 2018). 1 Here’s a list of 2022’s top-10 selling plug-in electric vehicle models worldwide: 2
- Tesla Model Y
- BYD Song Plus
- Tesla Model 3
- Wuling Hong Guang MINI EV
- BYD Qin Plus
- BYD Han
- BYD Dolphin
- BYD Yuan Plus
- Volkswagen ID.4
- BYD Tang
The expectation that EV sales for these and other models may grow at an exponential pace in the coming years is due primarily to shifting consumer preferences, public and private investment in building out the electric vehicle ecosystem, and technological improvements, plus other factors. If this trend continues as expected, there remain big investing implications.
Federal support from governments around the globe in particular has helped propel the EV market. Tax credits for electric vehicle purchases, for instance, have been a major catalyst helping spur consumer demand. recently, several governments in Asia, North America, and Europe have passed major legislation targeting the EV ecosystem to help accelerate the transition from gas-powered cars to electric vehicles. For example, the US Infrastructure Investment and Jobs Act that passed in 2021 allocated 15 billion for electric vehicle infrastructure.
Advancements in battery technology have been another critical component of the EV revolution. As range capacity has increased over the years, due primarily to innovations in battery technology, so too has consumer’s acceptance of electric vehicles. It was less than 20 years ago that electric vehicles were powered by lead-acid batteries with a roughly 55-mile max range capacity. Today’s lithium-ion technology (which has been the main type of EV battery since the late 2000s) currently has a max capacity of roughly 10 times the old lead-acid battery for some EVs.
Looking past liquid electrolyte-based lithium-ion technology, some industry insiders—including Tesla cofounder Martin Eberhard—have expressed optimism for emerging technologies, such as solid-state batteries. Solid-state batteries replace the liquid electrolyte with a solid electrolyte, potentially resulting in lower costs and a lengthening of the battery life cycle.
The expanding EV universe
In addition to the biggest automobile manufacturers in the world shifting into gear in the EV market—including SAIC Motor,BMW ( ), Honda ( ), General Motors ( ), Ford (. Toyota ( ), Hyundai ( ), Volkswagen ( ), and Porsche ( )—there are more pure EV makers than ever before. These relatively newer companies have made significant inroads to capture EV market share—especially in China.
Here are the 10 largest automakers by market cap who produce only electric vehicles: 2
The rise of these pure EV companies has been staggering. Tesla is already the largest publicly traded automaker in the world with a market cap of under 700 billion, as of mid-February 2023. Rivian made big news in late 2021 immediately after its IPO valued the company at nearly 14 billion—despite at the time not having delivered a single car to customers yet.
But it’s not just the new entrants and startups with their potentially lofty valuations that have pushed the EV market into the next gear. All of the legacy automakers have made significant strides ramping up their EV offering. As a result, consumers have more choices among EVs than ever before.
EVs and ETFs
If you are interested in exploring an electric vehicle-focused ETF, Fidelity offers the Fidelity Electric Vehicle and Future Transpo ETF ( ). Holdings information may be obtained by clicking the fund trading symbol.
The top 10 holdings of this fund, as of 3/31/2023, are:
- Tesla – 4.77%
- NXP Semiconductors – 3.88%
- STMicroelectronics – 3.70%
- Samsung SDI – 3.64%
- ON Semiconductor – 3.59%
- Aptiv – 3.41%
- LG Energy Solution – 3.20%
- NIO – 3.05%
- Skyworks Solutions – 2.88%
- Garmin – 2.85%
Can any bumps in the road slow down EVs?
An impressive aspect for the EV market has been its resilience in the face of the global supply chain headwinds that have impacted car makers, as well as a range of other businesses. Cars contain thousands of components, and despite supply issues across a spectrum of these components, 2022 was a record year for EVs—and 2023 is expected to be even better.
With that said, there are reasons for investors to be cautious. Not only are supply chain issues continuing to cause some shortages and delays for automakers, relatively higher input remain a factor that threatens to curb margins over the near term. For instance, key battery components including lithium carbonate, graphite, and nickel have all increased in price relative to several years ago. Of course, improvements in battery technology have been helping bring down over time, partially offsetting the uptick in input prices. Nevertheless, new car have increased substantially over the past several years, potentially pricing out many buyers.
Another risk that remains is the EV market’s reliance on government support. While many governments around the world are increasingly focusing on EV infrastructure, EV car sellers still depend to a great extent on tax credits and other policies. Just as subsidies and other governmental support for oil and gas industries help support the traditional gas engine market, the EV market relies to a great extent on the public-private partnership.
Nevertheless, trends in the electric vehicle market appear to be stronger than ever.
Current Price: 16.91 12-Month High: 49.00 12-Month Low: 13.60 1-Year Target: 28.11 Market Capitalization: 722.78 million
Founded in 2009, Miami-based Blink now boasts more than 32,000 charging stations across 18 countries. Blink’s recent growth is so explosive that it added over 3,000 charging stations in Q3 2021 alone — that’s more than some of the other companies on this list have in total.
As a relative titan among EV charging startups, Blink has already acquired and cannibalized several regional competitors, including ECOtality, U-Go, SemaConnect, EB Charging, and Blue Corner in Europe. Plus, Blink’s total revenue for Q4 2021 was 7.9 million, a 224% year-to-year increase.
Even still, the company’s voracious appetite for international expansion has some investors spooked. Share have been trending downwards since their Q3 high of 46.85 and have largely settled around 16 since May 2022.
But 16 could very well be the bottom of the trough for the aggressive EV charging startup. Government EV mandates are fast approaching in the USA and Europe, where Blink already has a massive head start on physical infrastructure. And unlike many of its rivals, Blink isn’t afraid to expand into rural areas, filling the gaps between cities and offsetting their installation costs with local grant money.
The bottom line is that Blink isn’t trying to reinvent the wheel. It’s just trying to plant as many of its Level 2 charges around the world as possible before EV adoption skyrockets. If that’s a strategy you can get behind, BLNK might be a strong buy.
ChargePoint Holdings (CHPT)
Current Price: 11.94 12-Month High: 36.86 12-Month Low: 8.50 1-Year Target: 23.64 Market Capitalization: 4.023B
Like Blink, ChargePoint’s aim seems to be to plant as many Level 2 charges as fast as possible globally.
But unlike Blink, ChargePoint sells most of its hardware to consumers and commercial partners, meaning it doesn’t own and operate most of its charging network. Instead, it generates revenue through initial hardware sales, maintenance services, and Cloud-based subscription plans.
At the risk of sounding reductive, there’s nothing special about ChargePoint. Unlike the other companies on this list, they don’t have a “secret sauce,” a game-changing new tech, or an elaborate expansion strategy. They’re just really good at selling Level 2 chargers.
Case in point, they’ve sold over 174,000 of them in 14 countries. They sell to apartment complexes looking to appeal to Gen Z, electric bus companies in Europe, and to businesses worldwide that just want to offer free EV charging to their employees.
They’re skilled in the simple art of moving product, and that’s attracted a lot of outside capital and strategic partners like Goldman Sachs, Volvo, and Starbucks.
Overall, the company’s consistent 60% to 100% annual revenue growth predicts a positive EBITDA (earnings before interest, taxes, depreciation, and amortization) by 2024. For an EV charging station startup, an actual profit on the horizon is simply unheard of.
Current Price: 20.57 12-Month High: 55.13 12-Month Low: 11.67 1-Year Target: 37.73 Market Capitalization: 34.363B
NIO stock is in a fascinating place at the moment. But before we dive into the alleged scandal racking today’s share price, let’s cover the basics.
NIO, Inc. is like the Tesla of China. Founded in 2014 and backed by Tencent Holdings, NIO designs and manufactures its own EVs, batteries, and charging stations. It even has a sold-out supercar, the EP9:
But considering that flagship supercars are typically loss leaders, prospective investors will be much more interested in NIO’s other breakthrough innovation: Batteries as a Service (BaaS).
With BaaS, you don’t need to find a fast charger and wait 20 minutes for a full charge. Heck, you don’t even need to get out of your EV. Instead, you can just pull into a fully-automated NIO Power Swap station, which swaps your old battery for a new one in under 10 minutes.
By building cars with swappable batteries, NIO directly addresses many of the highest barriers to EV adoption: range anxiety, maintenance concerns, and the eventual need to replace the factory battery for 13,000.
Most notably, it lowers the entry price: BaaS subscribers pay ~150 a month but save 10,500 off the car’s MSRP. It’s not just a concept, either; BaaS has already swapped 30,000 batteries across China and will soon expand into Europe.
Some investors feel that BaaS is a game-changer, which helped the stock rally back up to the mid-20s, nearly triple its 2018 IPO price. But trading stalled when a short-seller alleged that NIO was fudging their numbers.
On June 29th, Grizzly Research released a report claiming that NIO was exaggerating their revenue and net income by 10% and 95%, respectively, by “pulling forward 7 years of revenue” from subscription sales. Naturally, NIO vehemently denies the allegations.
But until the truth comes out, the stunted share price could provide an opportunity for investors who take NIO’s side — and see the future for BaaS.
Current Price: 6.18 12-Month High: 19.59 12-Month Low: 6.06 1-Year Target: 13.78 Market Capitalization: 450.636B
As these low-cap startups continue to grow their own charging networks, investors must wonder, “How are the trillion-dollar automakers going to respond to their early head start?”
Will the likes of Toyota and GM go the Google route of buying these companies early to cannibalize them? Will they suffocate them by withholding proprietary battery tech? Or maybe ensnare them with litigation to pave the way for their own charging networks? Or will they actually play nice and partner with them?
In the case of EVgo, we actually have a firm answer.
In February 2022, fast charging startup EVgo announced a commercial agreement with Toyota North America to provide bZX4 owners complimentary charging at their nationwide network of more than 800 fast chargers and 1,200 Level 2 chargers.
Back in November, EVgo also scored an “infrastructure build-out collaboration” with none other than General Motors. A relationship with GM is an especially big win, considering the automaker has one of the most aggressive EV development timelines in the auto industry: 30 models available globally by 2025.
EVgo is also the only charging station company powered by 100% renewable energy – which is sure to attract additional, ESG-focused outside capital. And thanks largely to sales in the fleet charging space (commercial trucks, vans, etc.) EVgo doubled its year-to-year Q1 revenue in 2022.
Despite this healthy business growth, EVgo’s share price is sitting at its 12-month low — down an eye-watering 55% since a brief Q1 rally following its partnership announcement with Toyota.
Such a steep fall has made some investors bearish on the company, surmising that it’s just like any other charging station stock: overvalued and overhyped. Even still, that GM partnership could pay off big for shareholders.
Global X Autonomous Electric Vehicles (NASDAQ:DRIV). 26.96
This fund focuses on companies involved in the development of autonomous vehicle technology, EVs, EV components such as lithium batteries, and EV materials such as lithium and cobalt. Many of its top holdings include big tech names such as Alphabet and Apple, which may be reviving its plans for an Apple Car, as well as automakers such as Tesla and Toyota. This fund is tilted towards developed markets, with a country exposure of 59.3% USA, 7.3% China, 6.6% Japan, 5.0% South Korea, and 3.5% Germany.
The KARS index tracks the performance of companies involved in the production of EVs and/or their components, as well as autonomous driving, shared mobility, electric infrastructure, and hydrogen fuel cell manufacturing. Its top holdings, like DRIV, include tech companies and car manufacturers alike (excluding Tesla), with the addition of semiconductor companies.
SPDR Kensho Smart Mobility ETF (NYSEARCA:HAIL). 62.98
HAIL tracks the SP Kensho Smart Transportation Index, which is composed of US-listed equities across developed and emerging markets. This index focuses on autonomous vehicle technology, EV technology, commercial drones, and advanced transportation systems. Its top ten holdings include Tesla and Nio, as well as fuel cell and EV charging companies.
IDRV tracks the performance of companies in the EV self-driving sphere across developed and emerging markets. Its top ten holdings are mostly big tech and car manufacturer names, many of which are covered by previous ETFs. IDRIV also reports its environmental, social, and governance (ESG) ratings and metrics, a benefit for investors worried about material risks posed by non-traditional financial metrics.
Global X Lithium Battery Technology ETF (NYSE:LIT). 63.45
LIT invests in companies that span the full lithium cycle from mining and refining to batter production. Energy storage and battery technology are both the obstacle and bridge to a carbon-free future, both in the EV and renewable energy sector. Given these trends, LIT may prove to be a valuable long-term hold. The ETF’s top ten holdings are mostly battery manufacturers, such as Albemarle Corp., the largest provider of lithium batteries for EVs, and a couple big name electronics companies such as Panasonic Corp.
BATT tracks the EQM Lithium Battery Technology Index and comprises companies in the development, production and use of lithium battery technology. Its top industry allocations are in the materials industry (50%), followed by automobiles components (20.9%), and in capital goods (14.5%). This index is tilted heavily towards China, giving it 38.02% weight, and offers broad exposure to developed and emerging markets alike.
Although plug-in cars currently only comprise 1% of US car sales and 2.6% of global sales, according to the International Energy Agency, investors should not be skeptical. The small figures today mean massive room for growth. Indeed, Bloomberg projects that EVs will account for 10% of global passenger vehicle sales by 2025 and rise to 48% by 2040. These estimates are equally optimistic for other forms of transportation, including buses, commercial vehicles (although hydrogen fuel cells may stand to benefit more), and two-wheelers such as scooters.
As decarbonization plays an increasingly important role across all sectors of the global economy, the EV and EV-affiliated industry is slated to benefit from a combination of technological innovation, private funds, and regulator support. Any of the companies and ETFs discussed in this article would be valuable additions to investors’ portfolios, which in turn, will help drive the transportation industry into a zero-emissions future.
About the Author
Natalie Wu is pursuing a Masters in International Economics and Finance at the Johns Hopkins School of Advanced International Studies. She can be reached at [email protected]