Electric vehicles typically describe cars or trucks that run without gas or diesel. They usually have large batteries that provide the energy required to run.
The gas that burns to fuel cars is a major source of pollution. Transportation contributes 29% of all greenhouse gas emissions in the U.S. Cars and trucks combined contribute 82% of all transportation-caused greenhouse gas emissions. Electric cars can be charged with power generated from more environmentally friendly sources, which make them one potential solution to this problem.
The Environmental Protection Agency (EPA) has analyzed electric vehicles and found that they pollute significantly less than gas cars even when accounting for the pollution caused to generate the electricity needed to charge the car.
Electric-vehicle exchange-traded funds (ETFs) typically invest in companies involved in producing electric cars or the technology surrounding them such as high-capacity batteries. We analyzed several electric-vehicle ETFs to arrive at this list of the best funds for investors to consider for their portfolios.
These are the best electric vehicle ETFs for investors to consider, presented in no particular order and based on the fund’s costs, historical performance, ability to track the electric-vehicle market, liquidity, and diversification between different types of businesses.
|ETF Name||AUM (as of Nov. 11, 2021)||Expense Ratio||Inception Date|
|Global X Lithium & Battery Tech ETF (LIT)||$5.8 billion||0.75%||July 22, 2010|
|KraneShares Electric Vehicles & Future Mobility ETF (KARS)||$326.1 million||0.70%||Jan. 18, 2018|
|iShares Self-Driving EV and Tech ETF (IDRV)||$532.4 million||0.47%||April 16, 2019|
|ARK Innovation ETF (ARKK)||$19.4 billion||0.75%||Oct. 31, 2014|
Global X Lithium and Battery Tech ETF (LIT)
- 3-year return (as of Sept. 30, 2021): 38%
- Expense ratio: 0.75%
- Assets under management (AUM as of Nov. 11, 2021): $5.8 billion
- Inception date: July 22, 2010
The Global X Lithium Battery Tech ETF (ticker: LIT) doesn’t focus solely on electric-vehicle makers. Instead, it focuses on companies involved in the production of lithium batteries and those that exist earlier in the supply chain, including miners and refiners.
The majority of electric vehicles these days use lithium-ion batteries, making this a way for investors to bet on the growth of electric vehicles while getting exposure to other industries that are reliant on batteries.
The fund has an expense ratio in line with the others on our list—0.75% equates to $7.50 per $1,000 invested—and it has returned 38% over the past three years, as of Sept. 30, 2021. This compares well to funds focused more specifically on electric vehicles. Top holdings include Albemarle, Tesla, and EVE Energy Co.
KraneShares Electric Vehicles and Future Mobility ETF (KARS)
- 3-year return (as of Oct. 31, 2021): 40%
- Expense ratio: 0.70%
- Assets under management (AUM as of Nov. 11, 2021): $326.1 million
- Inception date: Jan. 18, 2018
Investors who want a closer focus on electric vehicles might want to consider the KraneShares Electric Vehicles & Future Mobility ETF (KARS). This fund invests in electric-vehicle makers and the companies that build parts for those vehicles. It also holds some shares in businesses that are involved in the future of mobility, like self-driving vehicles and fuel-cell manufacturing.
With about $326 million invested in the fund, it is not as liquid as some other ETFs on this list which have AUMs in the billions. However, it has returned 40% over the past three years (as of Oct. 31, 2021) and has a 0.70% expense ratio ($7 per $1,000 invested), making it a solid choice for investors who want a stronger focus on automakers. Some household or well-known companies in its top 10 holdings include Tesla, General Motors, and Ford.
iShares Self-Driving EV and Tech ETF (IDRV)
- Return since inception (as of Sept. 30, 2021): 31%
- Expense ratio: 0.47%
- Assets under management (AUM as of Nov. 11, 2021): $532.4 million
- Inception date: April 16, 2019
The iShares Self-Driving EV and Tech ETF (IDRV) is a younger ETF, having begun in April 2019, and it’s an option for people who want to focus on the many different innovations in the automotive industry. The fund focuses on both electric vehicles and self-driving car technology, and seeks “long-term growth with access to companies that can shape the global economic future.”
This fund is the cheapest on our list, with an expense ratio of 0.47% ($4.70 per $1,000 invested) and it has returned 31% since its inception (as of Sept. 30, 2021). While it includes companies such as Tesla, IDRV also has non-vehicle-focused companies, including Qualcomm, Apple, and Intel, in its top holdings.
ARK Innovation ETF (ARKK)
- 3-year return (as of Sept. 30, 2021): 35%
- Expense ratio: 0.75%
- Assets under management (AUM as of Nov. 11, 2021): $19.4 billion
- Inception date: Oct. 31, 2014
The ARK Innovation ETF (ARKK) is the largest, but least-focused, fund on our list. However, that doesn’t mean it’s a bad choice for those who want to invest in electric vehicles.
The fund invests in companies involved in “disruptive innovation,” meaning those that are enabling new products and services or changing how the world works. A large portion of its funds are in electric-car makers, such as Tesla, but it also holds shares in cryptocurrency businesses, streaming services, and other technology companies.
If you want to build a portfolio focused on high-tech businesses, including electric-car makers, this fund is a strong choice. It has an expense ratio of 0.75% ($7.50 per $1,000 invested) and has returned 35% in the three years ending Sept. 30, 2021.
Pros and Cons of Investing in Electric-Vehicle ETFs
Market share of electric vehicles is expected to increase
Invest in a variety of industries related to electric vehicles
Electric-vehicle sales may not turn a profit
No ETF focuses solely on carmakers
- Market share of electric vehicles is expected to increase: Research shows that the market share of electric vehicles has grown over time in the U.S., Europe, and China, and analysts expect this growth to continue.
- Invest in a variety of industries related to electric vehicles: Investors interested in electric vehicles have multiple ways to invest, including funds focused on battery production and those focused on car technology. These funds cover several industries, so diversification is built into the funds.
- Electric-vehicle sales may not turn a profit: Electric-vehicle sales have not historically been profitable, with businesses designing and selling them with expectations of future profits. If these future profits don’t materialize, investing in electric vehicles could turn out poorly.
- No ETF focuses solely on carmakers: There are relatively few ETFs focused on electric vehicles, and there isn’t a good option for investors who want to invest solely in manufacturers. You’ll have to choose a fund that also includes other technology or that includes more of the supply-chain components of electric vehicles.
Historical Performance Trends
Historically, electric vehicles have not produced significant profits for their manufacturers, but they have consistently gained popularity. In 2020, consumers registered almost 3 million new electric vehicles worldwide.
Growth in sales has been consistent since 2010, although the growth has accelerated in recent years. The infrastructure required to make electric vehicles more viable for the standard consumer, including fast-charging stations, is also growing throughout the U.S., meaning electric vehicles could be positioned to become even more popular.
As for the ETFs on our list, all have benefited from decent returns, which may be linked back to the popularity and growth of electric vehicles over the years. All ETFs on this list have a return of 30% or more over the last two or three years. That’s better than the average stock market annual return of about 10%.
Is an Electric-Vehicle ETF Right for You?
If you’re interested in investing in transportation technology, particularly electric vehicles, then an electric-vehicle ETF might be a good way to invest. The funds offer a way to get exposure to both the automobile industry and the high-tech industry in the form of battery production and autonomous driving.
As always, before investing, take the time to weigh the pros and cons of each fund as well as your appetite for risk. Consider speaking to a financial advisor to make sure your investments are in line with your financial goals.
The Bottom Line
Electric vehicles are an exciting technology that have become more popular in recent years. With concerns about climate change growing, buying an electric vehicle is one way for consumers to reduce their emissions, which may mean this market is poised to grow. If you want to place a bet on people buying electric cars, these electric vehicle ETFs are one way for you to do that.
Frequently Asked Questions (FAQs)
How do electric-vehicle ETFs work?
Electric-vehicle ETFs work by investing in several different companies involved in the electric-car market, including carmakers, battery producers, and technology companies. They trade on an exchange just like a stock, and you can buy one or more shares of these ETFs.
How can you invest in electric-vehicle ETFs?
You can invest in electric-vehicle ETFs through your brokerage account. You might be able to get an ETF provided by your broker. Otherwise, all you have to do is choose a fund and submit a buy order. This may be done online, via an app, or in person with a broker.
When should you buy electric-vehicle ETFs?
It may be best to buy an electric-vehicle ETF when you expect it to gain value and when you have the ability to hold it for the long term, giving you the chance to weather volatility. Before investing, make sure the security you’re purchasing fits with your investing strategy and financial goals. Research the fund, consider its returns, and learn what trends may impact this investment.
The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.