ETFs For Investing In Self-Driving Cars
The three words - connected, autonomous, and electric - have become an integral part of the automobile bibliography. The disruption in the automobile world has pushed OEMs (Original Equipment Manufacturer) to reinvent while making inroads for technology players to become a part of the ecosystem.
The shift in the automobile industry is “driven by technology, shaped by demographic, regulatory and environmental pressures,” according to Goldman Sachs. With each year, the shift that's underway will become more evident.
IHS estimates that more than 33 million autonomous vehicles (SAE Level 4 and Level 5 functionality) will be sold globally in 2040. Meanwhile, McKinsey projects that the global sales of new electric vehicles could reach 4.5 million units, around 5% of the overall global light-vehicle market by 2020. The advanced driver assistance system (ADAS) market is projected to reach $91.83 billion by 2025, from $24.24 billion in 2018 at a CAGR of 20.96%. While the global autonomous driving market is expected to grow up to $173.15 billion by 2030.
The software driven future of the automobile space presents a great investing opportunity. Here is a look at some of the exchange traded funds operating in this space (in no particular order).
Launched in January 2018, the KraneShares Electric Vehicles & Future Mobility ETF (KARS) invests in companies engaged in changing the future of mobility. The ETF tracks the Solactive Electric Vehicles and Future Mobility Index which is composed of companies engaged in the production in the electric vehicle production, autonomous driving, shared mobility and its infrastructure (such as electric battery manufacturers). Its top ten holdings include names such as Ford, Daimler, Analog, NVIDIA, Texas Instruments, General Motors, Bayerische Motoren Werke, Tesla, Alphabet and Baidu; these add up to 36.93% of the portfolio. The ETF has an expense ratio of 0.70% with $34.837 million as assets under management. It has delivered 22.33% year-to-date (YTD) returns.
The Global X Autonomous & Electric Vehicles ETF (DRIV) offers a good opportunity to invest in the whole ecosystem of autonomous and electric vehicles, including component and material manufactures. Its tracks the Solactive Autonomous & Electric Vehicles Index. The ETF has a portfolio of 75 stock holdings and maintains a low concentration ratio with an allocation of 16.78% and 30.68% towards the top five and ten stock holdings, respectively. Its top ten holdings include Apple, Qualcomm, Microsoft, Texas, NVIDIA, Alphabet, General Electric, Samsung Electronics, Intel and Toyota. Launched in April 2018, the fund has $14.64 million as assets under management, an expense ratio of 0.68% and has delivered 19.26% YTD returns.
Launched in 2011, the First Trust Nasdaq Global Auto Index Fund (CARZ) is one of the oldest funds within this space, with a focus on traditional automakers that are now moving towards new age technologies. The top ten holdings are automobile manufacturers from across the globe; Daimler, Toyota, Volkswagen, Honda, General Motors, Ford, Hyundai, Peugeot, BMW and Renault, adding up to 61.14% of the portfolio. The funds underlying index, Nasdaq OMX Global Automobile is composed of 34 of the largest and most liquid companies in the automobile manufacturing space. The fund has $21.01 million as assets under management, an expense ratio of 0.70% and has posted 11.68% YTD returns.
Launched in 2018, Ideanomics NextGen Vehicles & Technology ETF (EKAR) tracks the the Innovation Labs Next Generation Vehicles Index, which includes a basket of global stocks that have exposure to the theme of electric and self-driving and autonomous vehicles. The ETF has a portfolio of 75 stocks from across the world. In terms of country allocation, U.S., Japan and Germany have a combined allocation of 62.65%. The top ten holdings are NVIDIA, Daimler, Siemens, Airbus, Honda Motor, Alphabet, Toyota, Intel, Baidu and NIDEC. The ETF has a corpus of $1.06 million, an expense ratio of 0.65% with YTD returns of 13.33%.
The next in line is the SPDR Kensho Smart Mobility ETF (XKST). Launched in December 2017, the ETF tracks the S&P Kensho Smart Transportation Index. The index is designed to capture companies that are driving innovation behind smart transportation such as autonomous and connected vehicles, drones and advanced transportation tracking and transport optimization systems. In terms of sectors, auto parts and equipment, semiconductors and automobile manufacturers have the highest weightage adding to a total of 45.94%. The ETF has a portfolio of 56 stocks with Rogers, Avis Budget, Yandex, American Axle & Manufacturing, Aptiv, WABCO, Fortive, Ford, BorgWarner and Trimble as the top ten holdings. The fund has $7.23 million as assets under management, 0.45% as expense ratio and has posted 24.01% as YTD returns.
ETF facts based on factsheets and information from respective websites. The author has no position in any stocks mentioned. Investors should consider the above information not as a de facto recommendation, but as an idea for further consideration.