Two Electric Vehicle ETFs to put on your watchlist

The initial boom in the electric vehicle sector may have passed, but it’s certainly not over for long-term investors. Especially for those considering electric vehicle exchange-traded funds on the market today.

Electric vehicles remained in the headlines for years, but it wasn’t until then-new United States President Joe Biden took office that these stocks took off. Biden proposed to spend $174 billion on promoting electric vehicles. This included putting 500,000 federal electric vehicles on the road.

It was an exciting time, but one that eventually saw the excitement wear off. That especially has been true lately, with electric vehicle and tech stocks lumped together as growth stocks to be wary of in a volatile market.

Even so, electric vehicles continue to offer a strong long-term investment potential, with ETFs providing an effective way to obtain exposure. With the top car manufacturers committing to a partial or full-fleet of electric vehicles by 2035, it’s clear where the money is moving. So, let’s look at which electric vehicle ETFs investors should consider today.

Global X Autonomous & Electric Vehicles ETF (DRIV)

The Global X Autonomous & Electric Vehicles ETF focuses on exactly what it states: autonomous and electric or hybrid vehicles. This includes companies, components, autonomous driving tech and network-connected services for transportation.

And as the name suggests, it’s global. So, while you get access through the 76 stocks to names like Tesla and Toyota Motor Corp, you also have exposure to NIO, as well as other technology stocks such as Apple and Alphabet. Companies that are trying their own self-driving technology, and in a number of places around the world.

Finally, the ETF also invests in companies that support the technology behind electric vehicles, especially the mining of lithium and cobalt. Without these, we won’t have batteries. Without batteries, no electric vehicles. So this ETF invests in it all.

The ETF provides a yield of 0.56% as of writing, and currently has an expense ratio of 0.68%. Shares of the ETF are down 32% year-to-date, but up 30% in the last five years.

KraneShares Electric Vehicles and Future Mobility Index ETF (KARS)

Whereas DRIV focuses on U.S. companies for its top electric vehicle companies, it’s important to have exposure to the rest of the world as well. Especially in countries such as China, where electric vehicles are hugely popular, and emerging markets where many of the parts, and the vehicles themselves, are produced.

As such, KraneShares Electric Vehicles and Future Mobility Index ETF (KARS) could be an interesting proposition. Again, this ETF doesn't focus on one specific part of the electric vehicle industry, but provides exposure across the full breadth, be it lithium production, car parts, or the tech behind self-driving.

KARS holds approximately 70 companies from around the world, with a large exposure to both China and the United States at 35% and 20% respectively. While 35% of its exposure is in electric vehicles themselves, the second-highest exposure is to batteries at 25% to 27%. This is significant, because you also will see growth in these areas from the clean energy boom.

The ETF holds a 0.70% expense ratio. Shares are down 34% year-to-date, and up 21% in the last five years.

Bottom line

The electric vehicle market is booming, whether the stock market reflects that or not. The key is to make sure that as an investor you have exposure to a diverse set of companies, countries and sources of revenue if you aim to make this an investment that will stand the tests of time.