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Electric vehicles (EVs) no longer represent a vision of the future. In 2022, sales of battery-powered electric vehicles and plug-in hybrid electric vehicles made up 10% of all new cars sold globally – up from 8.3% the previous year.

While Tesla still controls the lion’s share of global EV market, there are various challenger firms emerging – including China’s Li Auto Inc and NIO.

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

The market still has a lot of room to grow. In the UK, the government has been rolling out on-street charging points across the country, as well as offering incentives to encourage people to make the switch to electric.

By 2030, the UK will end the sale of new petrol and diesel cars and vans, while in the US, President Biden has ordered that all 645,000 government-issued cars and trucks will be replaced with US-made EVs. Many other countries, including Canada, Norway, Spain and Singapore, have also committed to phasing out gas-run vehicles over the next ten to 20 years.

How to trade or invest in EV 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

Three electric vehicle shares to watch

1. Tesla
2. Li Auto
3. Nio

Tesla

Despite its share price being down by over 70% from its all-time high, Tesla remains the world’s largest EV maker as of January 2023.

Its current market capitalisation of $386 billion, while a far cry from its peak of $1.24 trillion achieved in early 2022, still places the company well ahead of its closest rival, Li Auto.

In 2021, the US-founded automotive and clean energy company turned in a second consecutive year of profit, doubling 2020’s gross profit in the process.

Tesla announced a 20% global price cut of its cars at the start of 2023, with new orders expected to decline amid a slowing economy. The price cut also came after the company missed analysts’ delivery estimates for 2022.

Li Auto

China’s largest EV manufacturer registered a strong final month of 2022, as it reported a 51% year-on-year (YoY) growth in vehicle deliveries.

Like most EV stocks, Li Auto’s share price has also taken a beating in the last 12 months, with shares down nearly 50% since June 2022.

Despite the stock’s (and the wider sector’s) underperformance, analysts are confident that Chinese EV sales could rise another 33% in 2023.

Analysts have rated Li Auto a ‘buy’ alongside a consensus price target of $37.03, based on the latest MarketBeat data. The price target equates to a potential 64.7% share price upside.

Nio

Shares of China’s second most valuable EV maker, which are listed on the US, Hong Kong and Singapore stock exchanges, have been on a slight uptrend of late.

The Shanghai-based firm delivered 15,815 vehicles in December 2022, a new record-high monthly delivery, representing an increase of 50.8% year-over-year.

Nio also delivered record-high quarterly deliveries of 40,052 vehicles in the fourth quarter of 2022, a 60% YoY increase.

Overall, the company delivered 122,486 vehicles in 2022 in total, up by 34% from 2021.

Nio’s US stock price is down by over 60% in the last 12 months.

Three electric car ETFs to watch

1. Global X Autonomous & Electric Vehicles ETF (DRIV)
2. iShares Self-Driving EV and Tech ETF
3. KraneShares Electric Vehicles and Future Mobility Index ETF

Global X Autonomous & Electric Vehicles ETF (DRIV)

DRIV has nearly $850 million in assets as of the time of publication. The ETF, consistently among the most popular electric car ETFs globally, has an average annualised return of 7.85% since its inception, and an average annualised return of 11.62% in the last three years.

Its top five holdings are: Nvidia Corp (3.13%), Microsoft Corp (2.71%), Apple Inc (2.64%), Toyota Motor Corp (2.61%) and Qualcomm Inc (2.58%).

The fund ‘seeks to invest in companies involved in the development of autonomous vehicle technology, EVs, and EV components and materials’.

iShares Self-Driving EV and Tech ETF

The iShares Self-Driving EV and Tech ETF has over $420 million in net assets as of January 2023. It has an average annualised return of 9.7% since its inception, and an average annualised return of 8.81% in the last three years.

Among the ETF’s top holdings are: BYD Ltd (5.06%), Renault SA (4.67%), and Li Auto (4.53%).

The fund’s main goal is to ‘track the investment results of an index composed of developed and emerging market companies’ centred on growth and innovation ‘in and around electric vehicles, battery technologies and autonomous driving technologies’.

KraneShares Electric Vehicles and Future Mobility Index ETF

Unlike the other two EV ETFs mentioned above, KraneShares Electric Vehicles and Future Mobility Index ETF is not heavily weighted towards the US market.

It’s the smallest fund of the three, with just $200 million in net assets. Its average annualised return of 5.5% since its inception is also the lowest. On a three-year basis, its average annualised return comes up to 10.34%, the second highest of this list.

Like the previous two ETFs, KraneShares Electric Vehicles and Future Mobility Index ETF also does not offer 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 fast-growing industry (market share rose to 10% of all automobile sales in 2022), which has the buy-in of many governments
• Despite its relative infancy, the EV industry has already proven its ability to scale
• EV stocks and ETFs have the potential to be included in any ESG portfolio
• Many opportunities to diversify, in lieu of the growing number of EV stocks and ETFs to choose from
• Traders can access these assets quickly and easily through the IG platform

Electric vehicle shares and ETFs summed up

• The EV market is expected 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