Get Behind the Wheel with These 3 Electric Vehicle ETFs

Fresh off Tesla's (TSLA) latest earnings update, some investors might be mulling electric vehicle (EV) exchange traded funds.

That's an understandable reaction because Elon Musk's company looms large in a variety of EV ETFs and it's the dominant company in this industry. Still, Tesla and rivals are contending with multiple issues this year.

“Headwinds ranging from chip shortages to blackouts to port disruption all mean production is probably behind what management had hoped for. But the extra scale has still given Tesla the raw materials to deliver a step change in profitability,” says Hargreaves Lansdown analyst Nicholas Hyett. “Crucially that profitability now looks far more sustainable. Genuine and substantial free cash flow gives the group the firepower it needs to deliver on its ambitious expansion plans for the next few years.”

Supply chain woes are permeating an array of industries this year, but that doesn't dent the long-term thesis for EV ETFs, which are supported by sound fundamentals. Earlier this year, the International Energy Agency (IEA) said three million new EVs were registered in 2020 – an annual record.

“According to the IEA’s Global Electric Vehicle Outlook, if governments ramp up their efforts to meet international energy and climate goals, the global electric vehicle fleet could increase further still, hitting 230 million by the end of the decade. Both of these projections exclude two- and three-wheeled electric vehicle,” reports CNBC.

With that forecast in mind, here are a few of the titans of the EV ETF space to consider.

Global X Autonomous & Electric Vehicles ETF (DRIV)

The Global X Autonomous & Electric Vehicles ETF (DRIV) is one of the funds that got the EV ETF party started, debuting three and a half years ago. Today, it's one of the titans of the group with nearly $1.1 billion in assets under management.

DRIV follows the Solactive Autonomous & Electric Vehicles Index, investing in companies “involved in the development of autonomous vehicle technology, electric vehicles (“EVs”), and EV components and materials. This 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,” according to Global X.

An important attribute with DRIV is that it's not heavily concentrated relative to other thematic ETFs, meaning single stock risk is somewhat tame with this fund. Tesla is DRIV's largest holding, which isn't surprising, but it accounts for less than 4% of the portfolio. DRIV delivered average annualized returns of 20.62% since inception, according to issuer data.

KraneShares Electric Vehicles & Future Mobility ETF (KARS)

The KraneShares Electric Vehicles & Future Mobility ETF (KARS) is closing in on its fourth birthday and with about $285 million in assets under management, the fund has solid footing in the EV ETF space.

KARS is potentially appealing to a broad swath of investors because it's home to traditional EV names such as Tesla and China's Nio (NIO) as well as old school automotive manufacturers that are making EV introads. KARS' China exposure could be beneficial because some analysts believe the EV industry there is ripe for consolidation.

“I would say that consolidation is an inevitable trend in this industry,” said Bain and Company’s Helen Liu, in a recent CNBC interview. “Historically, we have seen invisible hands like the market and also visible trends, regulations, navigated the industry through the consolidation trend continuously.”

SmartETFs Smart Transportation & Technology ETF (MOTO)

The SmartETFs Smart Transportation & Technology ETF (MOTO) isn't a dedicated EV ETF. Rather, it blends EV and autonomous transportation exposure – two concepts that are often joined at the hip, confirming the MOTO structure is credible.

MOTO's roster “includes companies that manufacture, distribute, service, offer, support, or enable the following: electric vehicles, autonomous vehicles, transportation as a service, flying autonomous vehicles, autonomous or electric public transportation, and hyperloop-based transportation, for passengers or goods,” according to the issuer.

MOTO is actively managed and equally weights its 35 components. The fund is higher by 41% over the past year.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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