The U.S. electric vehicle, or EV, market has seen a number of significant catalysts occur within 2023 as the current Biden administration looks to accelerate the pace of domestic EV adoption and use.
On Feb. 15, the administration unveiled a significant reshoring mandate for EV chargers. Referred to as a “Made-in-America National Network of Electric Vehicle Chargers,” the standards target a national network of 500,000 EV chargers, and EV sales to account for half of all new car sales by 2030.
The related Bipartisan Infrastructure Law also promised a $7.5 billion investment in EV charging infrastructure and more than $7 billion for battery components and minerals. A key clause in this law is for all EV chargers funded by it to be built domestically, with at least 55% of their cost derived from U.S.-made components by 2024.
The legislation also impacts competition in the EV industry and consumer access. In order to access the $7.5 billion of federal funds for charging networks, EV manufacturers must agree to adopt a standardized charging system.As a result, Tesla Inc. (ticker: TSLA) opened its Supercharger network to all non-Tesla EVs in early March, with plans to more than double its footprint by the end of 2024.
Overall, these developments paint a path forward for increased EV representation in the U.S. automotive industry. By offering generous subsidies and incentives, the current Biden administration has set its eye on making EV adoption a key component of domestic manufacturing activity.
“We believe that EVs is a multidecade investment theme that investors may benefit from exposure to,” says Anthony Sassine, senior investment strategist at ETF provider KraneShares. “The runway for growth is clear as the world embarks on a mission to replace 1.3 billion internal-combustion engine vehicles with electric vehicles over the next 20 to 30 years.”
However, trying to pick individual EV stocks may not be suitable for all investors. While this approach can result in high returns should a pick pan out, it can also lead to disappointment should a company underperform, miss earnings guidance or suffer a scandal like Nikola Corp. (NKLA) did.
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“The EV space is expected to be intensely competitive, and at this point it is difficult to predict who the individual winners and losers will be,” says Alec Lucas, research analyst at Global X ETFs. “An exchange-traded fund, or ETF, can provide targeted exposure to a theme by capturing the current and expected leaders while evolving at each rebalance.”
Sassine agrees with Lucas, noting: “The electric vehicle ecosystem tends to be broad and includes many industries, so owning the entire basket rather than owning one or two companies alone tends to better diversify risks and provides a more balanced approach.”
With that in mind, here are seven of the best electric vehicle ETFs to consider in 2023:
| EV ETF | Average Annual Total Return Since Inception |
| KraneShares Electric Vehicles & Future Mobility Index ETF (KARS) | 4.8% |
| iShares Self-Driving EV and Tech ETF (IDRV) | 12.6% |
| Global X Autonomous & Electric Vehicles ETF (DRIV) | 11.3% |
| Global X Lithium & Battery Tech ETF (LIT) | 7.2% |
| Amplify Lithium & Battery Technology ETF (BATT) | -6.7% |
| Invesco Electric Vehicle Metals Commodity Strategy No K-1 ETF (EVMT) | -30% |
| SPDR S&P Kensho Smart Mobility ETF (HAIL) | 1.2% |
KraneShares Electric Vehicles & Future Mobility Index ETF (KARS)
“The macro headwinds experienced over the past year were negative for EV ETFs, as significantly higher interest rates in the U.S., the expiration of subsidies in China and COVID-related lockdowns impacted global sales,” Sassine says. “However, we believe this presents a buying opportunity for long-term investors to dollar-cost average into high-quality structural growth companies trading at a discount.”
By tracking the Bloomberg Electric Vehicles Index, KARS provides diversified exposure to global EV companies involved in manufacturing vehicles, developing autonomous driving software, building battery technology, or mining critical minerals like lithium that are required for the EV supply chain. All this comes at a 0.7% expense ratio, or $70 per year on a $10,000 investment.
iShares Self-Driving EV and Tech ETF (IDRV)
“Personally, I look for broad diversification in both industries and geography when it comes to EV ETFs,” says Peter Krull, partner and director of sustainable investments at Earth Equity Advisors. “China is the fastest-growing EV market, and Europe also has a number of leaders in the sector, so having an allocation to non-U.S.-based companies expands the possibilities for growth.”
An EV ETF that offers global exposure is IDRV, which tracks the NYSEA FactSet Global Autonomous Driving and Electric Vehicle Index. IDRV currently has 59 holdings, which includes notable EV stocks like Tesla and XPeng Inc. (XPEV). However, it also includes traditional automotive manufacturers in the midst of EV adoption, such as Renault SA (RNO.PA) and Volkswagen AG (VOW3.DE).
Global X Autonomous & Electric Vehicles ETF (DRIV)
“Although EV sales have increased dramatically in recent years, the theme is still in its early stages of adoption, with substantial room for further growth,” Lucas says. “For example, global EV sales effectively doubled between 2020 and 2021, and increased by another 55% to 60% in 2022, but the penetration rate stood at only about 13% in 2022.” To capitalize on further growth, investors could buy DRIV.
As one of Global X’s many thematic ETFs, DRIV offers pure-play exposure to 75 global companies involved in autonomous vehicle software, EV manufacturing or EV components by tracking the Solactive Autonomous & Electric Vehicles Index. Notable names include Tesla, Toyota Motor Corp. (7203.T), Honda Motor Co. Ltd. (7267.T), Ford Motor Co. (F) and General Motors Co. (GM). The ETF charges a 0.68% expense ratio.
Global X Lithium & Battery Tech ETF (LIT)
“Another recent catalyst for the EV industry is the push from automakers to vertically integrate into lithium mining or battery tech,” Lucas says. “GM’s investment in Lithium Americas to gain access to the developing Thacker Pass mine, and Tesla’s commissioning of a lithium refinery in Texas, are just two recent examples of this effort to reinforce supply chains.” For lithium exposure, consider LIT.
This ETF tracks the Solactive Global Lithium Index, which holds a concentrated portfolio of 40 companies involved in various phases of the lithium cycle, ranging from miners, producers and battery manufacturers. LIT is globally diversified, and also offers exposure to EV manufacturers such as Tesla and Rivian Automotive Inc. (RIVN). The ETF charges a 0.75% expense ratio.
Amplify Lithium & Battery Technology ETF (BATT)
An alternative to LIT is BATT, which tracks the EQM Lithium & Battery Technology Index. This ETF currently sports a portfolio of 103 holdings selected for exposure to three lithium- and battery-related verticals: battery storage solutions, battery metals and materials, and EVs. As of June 22, Tesla remains BATT’s largest holding with a weight of 9.8%.
So far, the ETF has been less popular than LIT with just $159.5 million in assets compared to $3.3 billion. However, BATT has a significant advantage over LIT in terms of fees. Currently, the ETF charges a 0.59% expense ratio, which may be attractive to cost-conscious EV investors. For a $10,000 investment, a 0.59% expense ratio works out to around $59 in annual fees.
Invesco Electric Vehicle Metals Commodity Strategy No K-1 ETF (EVMT)
ETFs like LIT provide exposure to lithium in an indirect way by holding miner stocks. A more targeted alternative is EVMT, which holds commodity futures involved in the EV supply chain.
“An often-overlooked way of investing in EVs is through the essential commodity inputs needed for EV production,” says Daniel Santiago, vice president of ETF research and distribution at Tidal Financial Group.
Currently, EVMT’s portfolio consists of actively managed various nickel, copper, aluminum, cobalt and iron ore futures contracts designed to beat the S&P GSCI Electric Vehicle Metals Index. “Commodities are one of the few inflation hedges that worked in 2021 and 2022, so an allocation can offer protection and benefit from supply or demand imbalances,” Santiago says. EVMT charges a 0.59% expense ratio.
SPDR S&P Kensho Smart Mobility ETF (HAIL)
EV investors looking to make a more diversified bet can use HAIL for exposure. This ETF tracks the S&P Kensho Smart Transportation Index, which itself is comprised of components from four underlying indexes: the S&P Kensho Electric Vehicles Index, the S&P Kensho Autonomous Vehicles Index, the S&P Kensho Advanced Transport Systems Index and the S&P Kensho Drones Index.
Overall, HAIL still has a sizable EV focus, with 20.3% of the ETF composed of automakers and 14.3% of the fund consisting of automotive parts and equipment suppliers. Notable EV stocks in this ETF include Tesla, Li Auto Inc. (LI), XPeng and NIO Inc. (NIO). Traditional carmakers like Ford, General Motors, Toyota Motor Corp. (TM) and Honda Motor Co. Ltd. (HMC) also make an appearance. HAIL charges a 0.45% expense ratio.
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7 Best Electric Vehicle ETFs to Buy originally appeared on usnews.com
Update 06/22/23: This story was published at an earlier date and has been updated with new information.
