ETFs for the Driverless Car Revolution

Investing News

Investors seeking exposure to the driverless car revolution now have the option of buying into exchange-traded funds (ETFs) specifically dedicated to driverless cars, electric vehicles, and other innovations in the automobile industry.

Among this class of ETFs are KraneShares Electric Vehicles and Future Mobility ETF (KARS), which debuted in January of 2018; InnovationShares NextGen Vehicle and Technology ETF (EKAR); which debuted in February 2018, and Global X Autonomous & Electric Vehicles ETF (DRIV), which debuted in April 2018. Prior to the introduction of these specific ETFs, there were no ETFs directly related to self-driving cars and electric vehicles, and only one ETF was focused on the automobile industry.

Key Takeaways

  • Investors seeking exposure to the driverless car revolution now have the option of buying into exchange-traded funds (ETFs) specifically dedicated to driverless cars, electric vehicles, and other innovations in the automobile industry.
  • KraneShares Electric Vehicles and Future Mobility ETF, InnovationShares NextGen Vehicle and Technology ETF, and Global X Autonomous & Electric Vehicles ETF are ETFs that are invested in driverless cars, electric vehicles, and other innovations in the automobile industry.
  • People looking to invest in driverless cars also have the option of adding ETFs to their portfolio that are focused on the automobile industry and related technological innovations, including First Trust’s Global Auto Index Fund or Industrial Innovation ETF by ARK Invest.

KraneShares Electric Vehicles and Future Mobility ETF (KARS)

The KraneShares Electric Vehicles and Future Mobility ETF (KARS) had $245 million in net assets as of Q2 2022 and a 0.70% expense ratio. The fund tracks the performance of Solactive Electric Vehicles and Future Mobility Index, which includes global companies involved with new transportation methods. These companies focus on electric vehicles or their components, technologies related to autonomous driving, shared mobility, lithium and copper production, hydrogen fuel cell manufacturing, and other innovations in the sector.

Ideanomics NextGen Vehicle and Technology ETF (EKAR)

The Ideanomics NextGen Vehicle and Technology ETF (EKAR) is made up of global stocks related to electric autonomous, or self-driving, vehicles. The fund invests in companies that fall into four categories within the sector: battery producers, original equipment manufacturers, suppliers, and producers of semiconductors and software. The ETF held a relatively small $9.2 million in net assets as of Q2 2022 and had an expense ratio of 0.65%.

Global X Autonomous & Electric Vehicles ETF (DRIV)

The Global X Autonomous & Electric Vehicles ETF (DRIV) seeks to correspond to the Solactive Autonomous and Electric Vehicles Index. The fund invests in companies that are involved in the development and manufacturing of software and hardware for driverless vehicles, and companies that produce electric vehicles and their components, such as lithium and cobalt. As of Q2 2022, the fund had $1.1 billion in net assets and a 0.68% expense ratio.

Related Exchange Traded Fund Options

People looking to invest in driverless cars also have the option of adding ETFs to their portfolio that are focused on the automobile industry and related technological innovations.

  • First Trust’s Global Auto Index Fund (CARZ) was launched in 2011, and until 2018, it was the only ETF related to the automobile industry. As of Q2 2022, the fund had $62 million in net assets with an expense ratio of 0.62%. The ETF tracks the NASDAQ OMX Global Auto Index, which includes nearly all of the major automobile manufacturers worldwide. Holdings include Honda Motor Company (HMC), General Motors (GM), Toyota Motor Corporation (TM), and Tesla Inc. (TSLA).
  • Another more broad investment option related to driverless cars is the Industrial Innovation ETF by ARK Invest (ARKQ), which launched in 2014 and had reached $1.37 billion in net assets as of Q2 022. ARKQ has a 0.75% expense ratio. This is an actively managed fund that invests in companies identified as being likely to benefit from technological advancements—including those related to electric and autonomous vehicles. Software and IT services companies, semiconductor firms, and automobile companies combine to account for about 80% of the portfolio assets.
  • ETF investors may also wish to consider a fund like the First Trust Clean Edge Green Energy Index Fund (QCLN). Launched by First Trust in 2007, the ETF focuses on companies involved in providing clean alternative energy. While there’s no direct connection to driverless cars, there is some significant overlap between companies involved in developing driverless cars and those involved in clean energy. This fund, which tracks the NASDAQ Clean Edge Green Energy Index composed of U.S.-listed firms engaged in developing clean energy, had $2 billion in net assets as of Q2 2022 and a 0.58% expense ratio. Semiconductor firms, which are likely to be essential in creating driverless car technology, account for about a third of the portfolio holdings.

Another indirect to invest in the growth of electric vehicles is to invest in ETFs that track lithium or related stocks. Lithium is a mined element that is a critical component of rechargeable batteries.

Which Companies Make All-Electric Vehicles?

While Tesla Motors may be the most popular electric car company, many traditional automakers have started selling all-electric vehicles such as GM, Toyota, Hyundai, Ford, and Kia, among others.

What Is the Difference Between an All-Electric and Hybrid Vehicle?

An all-electric vehicle runs on batteries alone, which are most typically recharged by plugging the vehicle in. A hybrid-electric vehicle, on the other hand, has a gasoline-powered engine along with a small electric motor. The electric motor is recharged by the car’s braking system and is put to use to increase overall gas mileage.

What Percentage of Vehicles in the U.S. Are Electric?

As of 2021, fewer than 1% of the country’s 250 million vehicles are electric. The Biden Administration, however, has set a goal to increase this figure to at least 50% by the year 2050.

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