In this content I am presenting my personal opinion as an active private investor. This content is not intended to provide investment, financial, accounting, legal, tax or other professional advice and should not be relied upon or regarded as a substitute for such advice.

Are electric vehicle ETFs a good investment opportunity?

electric vehicle ETFs

Why Invest in electric vehicle stocks?

Transport accounts for 14% of global climate-damaging emissions, and replacing combustion engines with batteries is critical to reduce these emissions and achieve net-zero for the planet.

Countries around the world, such as Norway, the U.K, Japan, France, and Canada, have banned sales of new combustion engine vehicles between 2025 and 2060. China is also aiming to ban all diesel and petrol vehicles soon, with policies pushing the sales of hybrid, battery, and fuel cell-powered cars.

Apart from favorable regulations, EV sales are expected to blow up with the technological improvement of EVs, as well as their increasing appeal to new groups of customers. The enhancement of ranges and charging times of batteries is a crucial factor to make EVs more popular. The median range is already reaching more than 260 miles, and the number of charging stations keeps growing. Even legacy car companies such as Ford and GM, are following the trend and strongly investing to go fully electric.

With all of these advancements, it is projected that electric cars will grow from 4% of total cars manufactured to a whopping 40% by 2030.

In summary: new model introductions, dropping technology costs, tax incentives for EV owners, stricter emissions standards, government subsidies, charging station rollouts, more efficient battery technology, and a shift away from fossil fuels reliance all point towards an EV-based mobility future. 

ETFs

Electric vehicles are here to stay, with some EV stocks outpacing the average market and emerging with surging popularity.  For example, iShares MSCI ACWI, the largest and broadest ETF with more than 2000 global stocks, increased by 18.38% in 2021. 5 EVs ETFs outperformed the average market as shown in the table below.

Here are ten major ETFs that invest in EVs:

 

Fund/Ticker

2021 performance

No. of Holdings

Countries

More information

1

Global X Autonomous & Electric Vehicles ETF (DRIV)

27.8%

76

U.S. (70%), Japan, Hong Kong

 

2

iShares Self-Driving EV and Tech ETF (IDRV)

27.3%

122

U.S. (55%), Germany, Japan

 

3

KraneShares Electric Vehicles and Future Mobility Index ETF (KARS)

24.0%

70

China (30%), U.S. (36%)

 

4

SPDR S&P Kensho Smart Mobility ETF (HAIL)

5.6%

85

U.S. (80%), Hong Kong, Japan

 

5

Fidelity Electric Vehicles and Future Transport ETF (FDRV)

50

U.S. (65%), Korea, Hong Kong, France

 

6

SmartETFs Smart Transportation & Technology ETF (MOTO)

17.1%

36

U.S. (56%), Germany, South Korea

 

7

Capital Link Global Green Energy Transport and Technology Leaders ETF (EKAR)

16.9%

69

U.S., Japan, Hong Kong

 

8

Simplify Volt RoboCar Disruption and Tech ETF (VCAR)

18.4%

20

U.S. (75%), Brazil, Taiwan

 

9

Global X Lithium & Battery Tech ETF (LIT)

36.7%

42

China (44%), U.S.

 

10

Amplify Lithium & Battery Technology ETF (BATT)

16.8%

84

China (30%), U.S., Australia

 

But… what’s the catch when investing in these ETFs?

Taking a closer look, it is clear that their holdings don’t only integrate EV-related companies.

Here are some examples:

  1. Global X Autonomous & Electric Vehicles ETF (DRIV), the top of the list, invests in EV makers (such as Tesla), manufacturers of EV components and battery materials, as well as large tech firms and legacy automakers that have invested in self-driving technology and EVs. But EVs aren’t the main business line for many of the stocks in their top holdings, actually, its three top holdings are Alphabet (3%), Apple (3%), and Toyota (3%).
  2. iShares Self-Driving EV and Tech ETF (IDRV) focuses on companies that aim to enable self-driving and autonomous vehicles, meaning that many of the fund’s top holdings are big tech and semiconductor stocks as well as automakers that also manufacture EVs. These include Apple, Advanced Micro Devices, Nvidia, Tesla, Toyota, and GM.
  3. Fidelity Electric Vehicles and Future Transport ETF (FDRV), the cheapest EV ETF, invests in EV and autonomous carmakers, related tech, and energy systems. It also includes other companies that aim to “change the future of transportation”. It is a diversified fund with 50 holdings, with its top three being Uber, Tesla, and Qualcomm.
  4. Global X Lithium & Battery Tech ETF (LIT) focuses on EV batteries investing in a variety of lithium companies (including miners, refiners, and battery manufacturers). Its top holding is lithium, bromine, and catalyst solution producer, Albemarle with 11.5%. It also includes LG Chem, which manufactures EV batteries through its subsidiary LG Energy solutions, and Panasonic.
  5. Amplify Advanced Battery Metals & Materials ETF (BATT) invests in battery materials manufacturers and suppliers, as well as EV manufacturers in China, U.S., and Australia. It has over 80 holdings and its top ten stocks include battery manufacturers CATL and BYD, Tesla, and green metal miners BHP Group, Glencore, and Norilsk Nikel. Mining company BHP Group is the largest investment at around 8% of the fund.
Also Read:

How much climate impact is in EV ETFs?  

Although these ETFs are investing in important parts of the EV supply chain, it is easy to see that many of their top holdings have main business lines that are miles away from electric mobility and a 100% contribution to a cooler planet. “Some of these ETFs have Pure Climate Stocks among their holdings, for example Tesla. But investing in these ETFs also means investing in legacy automakers that keep producing fossil fuel-powered vehicles. Last year, for example, automaker General Motors (GM) in quarter 4 only delivered 26 all-electric vehicles in the U.S. This makes a ratio of 16,950 fuel cars for each electric car sold. Toyota did better and reached a ratio of 72 fuel cars for each all-electric sold in Japan for the whole year 2021. These numbers show that although these producers have made promises to increase their percentage of electric vehicles, they are still far from a full climate-friendly transition.

What are the alternatives?

For a climate-concerned investor wanting to invest with real impact, an alternative way to go is investing directly in stocks that make their profits only from electric mobility and its direct supply chain.

Some examples of Pure Climate Stocks connected to EVs that you might want to take a look at:

  • US EV manufacturers: apart from Tesla (you can read the stock analysis here), Lucid, and Volcon have risen as relevant players in the industry, offering not only cars but also e-scooters and e-bikes.
  • Chinese EV manufacturers: the e-scooter giant, Niu Technologies, Nio, and XPeng have shown promising outlooks.
  • EV charging solutions: Blink Charging, Charging Point, and Compleo Charging Solutions are some of PCS stocks that focus on developing charging stations, mostly in the US and Europe, with the chance of filling the EV charging gap.
  • Battery production: Vulcan Energy Resources (you can read the stock analysis here) engages in the mineral exploration activities and is part of the Zero Carbon Lithium project, and LG Energy solutions manufactures lithium batteries, which will be progressively more relevant in the e-mobility transition.

Summing up

EVs ETFs are an opportunity way to benefit from the sustainability and e-mobility trend. They do not, however, include only Pure Climate Stocks. In fact, the majority of stocks in those ETFs are not pure climate plays. As a climate-conscious investor, this means you should look deeper and you may want to decide, whether to avoid investing in those ETFs or go for individual Pure Climate Stock investments.

Subscribe now to our newsletter and receive detailed stock analysis of Pure Climate Stocks and 4 practical tips on successful climate-impact investing.

Download 4 practical tips for successful climate investing.
For better investment decisions for your money and the climate