The electric vehicle (EV) industry is buzzing with excitement, largely fueled by Tesla Inc. (ticker: TSLA). Recently, after a demonstration of Tesla’s upcoming capabilities, CEO Elon Musk made bold promises about the future of autonomous vehicles.
Notably, he unveiled plans for the “Cybercab,” a fully autonomous taxi priced under $30,000 and set for production by 2026, alongside a 20-passenger robovan designed to transform urban mobility.
Following these announcements and strong third-quarter earnings that beat expectations on earnings per share and gross margins, Tesla’s stock surged 22%, reaching new highs for the year. Musk also teased plans for a lower-cost EV set to enter production in 2025.
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However, it’s not just Tesla that is making waves. “The EV industry in China continues to experience significant growth, with new EV sales surpassing 50% of total car sales for three consecutive months,” says Anthony Sassine, senior investment strategist and head of Middle East and North Africa at KraneShares, an asset management firm.
Sassine highlights that notable Chinese EV manufacturers like BYD Company Ltd. (OTC: BYDDF), Zeekr Intelligent Technology Holding Ltd. (ZK) and Li Auto Inc. (LI) are leading the charge, with Nio Inc. (NIO) and XPeng Inc. (XPEV) also showing robust sales figures.
“Tesla has recently regained ground in China, but we believe its growth may still be hindered by a lack of new, lower-priced models,” Sassine argues. For example, the current base model 2025 Tesla Model 3 starts at $44,130, while the BYD Han EV is priced at 229,800 Chinese yuan, or around $36,500.
This competitive pressure underscores the importance of considering broader exposure to the EV market, including key players in China that could show up on American streets in the future. “Looking ahead, we expect the EV industry to enter a second wave of growth, one that could surpass the first as mass adoption accelerates and EV infrastructure continues to expand globally,” Sassine says.
For investors looking to capitalize on the diverse opportunities within the global EV sector, exchange-traded funds (ETFs) can offer a strategic tool. “The EV 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,” Sassine says.
Whether you’re bullish on Tesla or looking to hedge with investments in its competitors, EV ETFs can offer a convenient and effective way to invest in the future of transportation.
Here are seven of the best EV ETFs to buy today:
| ETF | Expense ratio | Average annual total return since inception |
| KraneShares Electric Vehicles & Future Mobility Index ETF (KARS) | 0.72% | 5.6% |
| iShares Self-Driving EV and Tech ETF (IDRV) | 0.47% | 6.0% |
| Global X Autonomous & Electric Vehicles ETF (DRIV) | 0.68% | 8.6% |
| SPDR S&P Kensho Smart Mobility ETF (HAIL) | 0.45% | 1.2% |
| Global X Lithium & Battery Tech ETF (LIT) | 0.75% | 3.9% |
| Amplify Lithium & Battery Technology ETF (BATT) | 0.59% | -43.9% |
| Invesco Electric Vehicle Metals Commodity Strategy No K-1 ETF (EVMT) | 0.59% | -19.8% |
KraneShares Electric Vehicles & Future Mobility Index ETF (KARS)
“While increased competition has pressured margins for some EV manufacturers and suppliers, it has also pushed the industry to find ways to lower EV prices,” Sassine says. “In response, luxury EV brands like Li Auto and Nio have introduced more affordable EV models, while others have reduced prices on existing models, bringing the industry closer to ICE parity.” For EVs, KraneShares offers KARS.
This ETF tracks the Bloomberg Electric Vehicles Index, which encompasses the complete EV supply chain, including raw material production, manufacturing, sales and charging infrastructure. Thanks to KraneShares’ Chinese market expertise, this ETF holds many hard-to-access “A-Shares” companies listed on mainland Chinese stock exchanges. The ETF charges a 0.72% expense ratio.
iShares Self-Driving EV and Tech ETF (IDRV)
“We believe that EV adoption will still outpace traditional automotive sales growth over the long term due to increased efficiency in driving range, energy consumption and charging times, ultimately leading to lower operating cost and higher adoption,” says Robert F. Draper Jr., founder and chief investment officer at Draper Asset Management. Another ETF investors can use for EV exposure is IDRV.
This ETF tracks the NYSEA FactSet Global Autonomous Driving and Electric Vehicle Index, a globally diversified benchmark holding 49 companies. Top holdings currently include Tesla, Li Auto, XPeng, BYD and Nio. It is heavily weighted to the consumer discretionary sector and both the U.S. and Chinese EV industries at 30% and 26%, respectively. IDRV charges a 0.47% expense ratio.
Global X Autonomous & Electric Vehicles ETF (DRIV)
“It is our opinion that the major U.S. automotive manufacturers, commonly referred to as the ‘Big Three,’ have largely relinquished the pure EV market to Tesla and Chinese counterparts, most notably BYD,” Draper notes. This trio includes General Motors Co. (GM), Ford Motor Co. (F) and Stellantis NV (STLA). While these manufacturers have long dominated the ICE industry, their EV efforts have largely faltered.
Still, investors may still want to include these giants in the event that either EV market penetration slows, or their management executes a successful pivot later. For this role, consider DRIV, which owns the usual EV companies but also includes ICE manufacturers like General Motors, Toyota Motor Corp. (TM) and Honda Motor Co. Ltd. (HMC). DRIV charges a 0.68% expense ratio.
SPDR S&P Kensho Smart Mobility ETF (HAIL)
HAIL is less of a pure EV play than a bet on the future of transportation. This ETF tracks the S&P Kensho Smart Transportation Index, which holds EV industry stocks but also owns companies that manufacture drones, autonomous vehicles, transportation tracking and Internet of Things technology for vehicles. It charges a 0.45% expense ratio and has around $27 million in assets under management.
HAIL’s benchmark is a composite, blending 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. The end result is a portfolio of 71 companies, with 23% belonging to automotive manufacturing and another 16% comprising automotive parts and manufacturing.
[SEE: 7 Drone Stocks to Buy in 2024]
Global X Lithium & Battery Tech ETF (LIT)
The EV supply chain doesn’t start with manufacturers. Arguably, it begins when the critical materials for batteries are mined, notably lithium. Lithium is a crucial component in the production of rechargeable lithium-ion batteries, which power the majority of commercially available EVs today. For exposure to the lithium ecosystem, Global X ETFs offers LIT at a 0.75% expense ratio.
LIT tracks the Solactive Global Lithium Index, which retains some exposure to notable EV manufacturers like Tesla and BYD. However, the ETF is largely dominated by materials sector companies due to its focus on miners. Notably, the top holding in LIT is Albemarle Corp. (ALB), a leading producer of lithium and a large supplier for global EV manufacturers. LIT currently has just over $1.3 billion in assets.
Amplify Lithium & Battery Technology ETF (BATT)
“BATT offers investors an affordable entry into the fast-growing lithium and battery technology market, providing global exposure to the full battery ecosystem from raw materials to EV and energy storage manufacturers as well as charging infrastructure companies,” says Christian Magoon, founder and CEO of Amplify ETFs. The ETF charges a 0.59% expense ratio, lower than competitor LIT.
This ETF tracks the EQM Lithium & Battery Technology Index. In terms of top holdings, BATT owns both BYD and Tesla, and also BHP Group Ltd. (BHP), a notable large-cap Australian-based lithium miner. “Since BATT’s launch in 2018, we’ve seen additional demand drivers emerge for these metals from mobile technology and the need for large-scale energy storage,” Magoon explains.
Invesco Electric Vehicle Metals Commodity Strategy No K-1 ETF (EVMT)
According to asset management firm Invesco, rather than betting on EV companies, which may or may not survive given increased competition, holding direct exposure to the actual metals used in EV manufacturing may be a more efficient approach. For this role, Invesco offers EVMT, a unique ETF that tracks the S&P GSCI Electric Vehicle Metals Index for a 0.59% expense ratio.
EVMT doesn’t hold any stocks. Instead, it holds a portfolio of nickel, copper, aluminum, cobalt, lithium and iron ore via futures contracts. These industrial metals are critical to the production of EVs. In addition, unlike some commodity futures ETFs, EVMT is structured to avoid sending investors a K-1 form at the end of the year, which significantly simplifies tax reporting requirements.
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7 Best Electric Vehicle ETFs to Buy originally appeared on usnews.com
Update 10/29/24: This story was previously published at an earlier date and has been updated with new information.
