Are these the best electric vehicle (EV) stocks and ETFs to watch?

Electric car stocks and ETFs: what you need to know about the sector

Electric vehicles (EVs) no longer represent a vision of the future. Since the Covid pandemic, sales of EVs have surged globally, with industry heavyweight Tesla continuing to post strong growth and rival companies such as NIO and BYD also forging ahead.

According to figures from the International Energy Agency (IEA), in 2022 a total of 14% of all new cars sold globally were electric, as compared to 9% in 2021 and under 5% in 2022.

In the US, electric car sales leaped 55% in 2022, to hit a sales share of 8%, while in Europe they rose by more than 15%, to account for over 20% of vehicle sales.

EV adoption is also strong here in Australia, with electric cars accounting for 8.4% of new vehicle sales in 2023, compared to a full year figure of just 3.8% the year previously.

China has emerged as the world's largest electric car market, accounting for around 60% of global sales following a push from Xi Jinping for a reduction in carbon emissions.

While Tesla still controls the lion’s share of global EV market, there are various challenger firms now emerging, especially from the Chinese auto sector. These rivals to Tesla's dominance include NIO, BYD, Li Auto and Xpeng.

Furthermore, traditional automakers such as BMW and Toyota have been pivoting towards the EV space and investing in artificial intelligence and battery technology.

Desspite surging growth since the start of the 2020's, the market still has ample room to grow. This is particularly the case given mounting climate concern amongst affluent consumers, vigorous policy support from governments around the globe for clean energy, as well as ongoing technological improvements that make electric vehicles an increasingly preferrable option for drivers.

Five electric vehicle shares to watch

1. Tesla (NASDAQ: TSLA)
2. NIO (NYSE: NIO)
3. Li Auto (NASDAQ: LI)
4. BYD (1211.HK)
5. Xpeng (NYSE: XPEV)

Tesla (NASDAQ: TSLA)

Easily the most famous EV manufacturer in the world – in the first quarter of 2023 it was estimated that Tesla owned a massive 22% share of the global electric vehicle market, up from 19% in the final quarter of 2021.

In 2023, Tesla's share price rose by over 100%, despite competition from upcoming challengers in China as well as controversy surrounding CEO Elon Musk's involvement with social media giant X.

The company is no stranger to criticism, with Musk known for his ability to move Tesla’s stock price with a single tweet. The firm has also come under fire for delays in the roll-out of its electric vehicles, including the much-maligned cybertruck and the more affordable Model 3 car.

But the company’s long-term value lies in its ability to dominate the booming electric vehicle market, and produce the most efficient and cost-effective lithium-ion batteries.

NIO (NYSE: NIO)

Chinese electric vehicle manufacturer NIO has positioned itself as an affordable alternative to Tesla. Since the company was founded in 2014, it has released three premium electric SUVs and a sports car, and pioneered a battery-swapping programme across China.

The company has invested heavily in self-driving technology and other automation features. In 2020, it launched NOMI, the world’s first in-car artificial-intelligence system.

NIO's share price has taken a beating since the start of 2024, falling over 31% in January alone. Sell-side analysts that cover the electric car company have recently lifted their consensus EPS estimate by 18.6% over the last 30 days, which could translate into share price gains in the near-term.

Li Auto (NASDAQ: LI)

Nasdaq-listed Li Auto Inc is one of a slew of EV companies from China to rise to prominence in the past several years, helping to propel the country to pole position in terms of auto sales.

First founded in 2015, Li listed on the Nasdaq in July 2020 and in November 2023 released its fourth vehicle model, the Li Mega, a battery electric full-size flagship MPV.

In mid-April, Macquarie Equity Resesarch gave Li an Outperform rating, ranking it ahead of Chinese EV peers NIO and Xpeng.

'China's EV market is now well past the early adopter stage of the S-curve and firmly into mass adoption,' Macquarie analysts said. 'This shift means previously niche start-up EV pure plays need to chase volume in the mast market.'

According to these analysts, Li is well-positioned to capitalise upon consumer trade-up trends and accelerating EV adoption amongst consumers.

BYD (1211.HK)

The leading titan in China's EV sector, Hong Kong-listed BYD lays claim to the world's largest electric vehicle manufacturer in the form of 99%-owned subsidiary BYD Auto.

The company has seen strong sales growth since 2020, commanding an ever-increasing share of the all-important Chinese EV market.

This growth helped BYD Auto to become the world's largest producer of electric vehicles in the final quarter of 2023, outpacing even Elon Musk's Tesla.

BYD's share price could benefit from a push by the Chinese government to increase domestic demand, with the launch of policies to raise vehicle consumption in what has become the world's largest market for clean energy cars.

XPeng (NYSE: XPEV)

Some of the leading figures in China's tech sector joined forces to launch XPeng Inc just a decade ago, including Alibaba executive He Xiaopeng and Xiaomi-founder Lei Jun.

The Guangzhou-based company has since listed in both New York and Hong Kong, as well as extended its presence well beyond the shores of China, with offices in Mountain View, California, as well as Munich, Germany, as part of efforts to better penetrate the global market.

XPeng has bet heavily on the potential forartifical intelligence to further augment the appeal of electric vehicles. In 2018 XPeng's US-subsidiary XMotors.ai obtained a permit to test self-driving vehicles in California, while in August 2023 it acquired the autonomous driving technology unit of vehicle hire company DiDi.

Three electric car ETFs to watch

1. iShares Electric Vehicles and Driving Technology Ucits ETF
2. iShares Self-Driving EV and Tech ETF
3. KraneShares Electric Vehicles and Future Mobility Index ETF

iShares Electric Vehicles and Driving Technology Ucits ETF

The iShares Electric Vehicles and Driving Technology UCITS ETF mirrors the performance of a bespoke index of companies that are active in the electric vehicle space.

This means that investors can access multiple EV stocks and shares, including software manufacturers with a single investment. This exchange-traded fund (ETF) includes NVIDIA, EV heavy hitters such as Tesla, and traditional automakers such as Toyota and Hyundai, who have moved into the electric vehicle space in recent years.

iShares Self-Driving EV and Tech ETF

The iShares Self-Driving EV and Tech ETF shares a lot in common with the iShares Electric Vehicles and Driving Technology Ucits ETF, but with an emphasis on tech firms rather than car manufacturers.

NIO and Tesla make the list, along with companies such as Apple and Qualcomm, which are working on software solutions for self-driving cars.

KraneShares Electric Vehicles and Future Mobility Index ETF

Unlike the other two electric vehicle ETFs mentioned above, KraneShares Trust’s KraneShares Electric Vehicles and Future Mobility Index ETF is not heavily weighted towards the US market, and has no exposure to Tesla.

Instead, it offers access to China’s equity market by tracking companies such as Baidu and NIO, alongside more traditional EV plays such as NVIDIA and BMW. As the name suggests, this fund is future focused, and includes several small but innovative tech shares.

Why do people trade and invest in EV stocks and ETFs?

• It is a growth industry, which has the buy-in of many governments
• Despite its infancy, the industry has already proven its ability to scale
• EV stocks and ETFs can form part of a balanced ESG portfolio
• It is easy to diversify, with many EV stocks and ETFs to choose from
• It is quick and easy to access these investments through the IG platform

Electric vehicle shares and ETFs summed up

• The EV market is set to grow substantially over the next 20 years
• You can take advantage of this growth by investing in EV stocks and ETFs
• It is easy to build a diversified EV share portfolio with IG

How to trade or invest in electric vehicle shares and ETFs

You can invest and trade in electric vehicle stocks by choosing a stock portfolio that include large- and small-cap companies which are active in the space. Alternatively, electric car ETFs offer instant diversification across the entire EV sector.

Follow these steps to access the growing EV market:

1. Decide whether you want to trade an EV exchange traded fund (ETF) for broad exposure, or an EV stock
2. Choose whether to trade or invest
3. Open an account or log in to your existing account
4. Place and monitor your trade

Find out more about how to trade or invest in EVs

Trading and investing are two ways to take a position on electric vehicle stocks and ETFs. When you invest, you effectively take a long-term position in a company or fund in the hope that its value will rise over time. When you trade, you are making short-term decisions to make quick gains in growing markets.

Find out more about the difference between trading and investing