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Electric vehicles (EVs) no longer represent a vision of the future.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 used to be the largest EV maker, it has recently been surpassed by Chinese company BYD, and it is no longer a two horse race.

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

Electric vehicle shares to watch

1. Tesla
2. BYD
3. Li Auto
4. Nio

Tesla

Despite its share price having fallen by more than 30% year-to-date, Tesla continues to vie with BYD to remain the world’s largest EV maker. Its current market capitalisation of $536 billion, while a far cry from its peak of $1.24 trillion achieved in early 2022, still places the company as one of the most valuable car businesses in the world.

In 2023, vehicle deliveries grew by 38% year-over-year to 1.81 million, while production rose by some 35% to 1.85 million. However, the company warned in January that delivery growth rates would be notably lower in 2024 — and CEO Elon Musk also advised that profit margins would only start to improve when central banks start cutting interest rates.

For context, Q4 2023 profit margins stood at 17.5%, down from 23.8% a year earlier.

BYD

BYD is now the world’s largest EV maker, having sold 1.57 million battery EVs last year, up from just 130,970 all-electric vehicles in 2020. The rapid ascent of the company has been enough to cause Musk to note that it could ‘demolish’ global rivals without trade barriers.

This is because some of its models — including BYD Seagull — cost less than $10,000 and are still profitable. This means the company could flood global markets with cheap vehicles; indeed, Ford EV COO Marin Gjaja has already warned that ‘ultimately the Chinese will come to the US.’

Detractors such as the Alliance for American Manufacturing argue that the company enjoys an unfair level of state support from China, though this is not guaranteed to continue.

Li Auto

Li Auto is another China-based EV stock, but one which arguably operates in market territory closer to Tesla price points. The company recently announced that it plans to deliver fewer vehicles in the near term than previously anticipated, blaming the reduced guidance on its first purely battery electric vehicle, the Mega.

For context, the minivan is currently priced at circa $78,000, a huge premium on comparable petrol-powered cars and also most EV competition in China. This illustrates the difficulty of ramping up EV production at a reasonable cost — though the company has previously grown fast. It is possible that a return to looser global monetary policy will see growth increase faster.

Nio

Down more than 40% year-to-date, Nio shares reflect growing uncertainty in the EV maker. Q4 revenue did come in at some 17.1 billion yuan, but this was less than analysts had expected. And while it held a 57.3 billion yuan cash position, the company is expected to burn through significant capital in 2024 as it plans to develop its new ET9 model.

There are also some concerns regarding a general lack of new models —the company only has one coming out later this year, while competition in the mass market continues to intensify.

Electric car ETFs to watch

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

Global X Autonomous & Electric Vehicles ETF (DRIV)

The Global X Autonomous & Electric Vehicles ETF has nearly $600 million in net assets and remains consistently among the most popular electric car ETFs globally. It has made a positive return over the past five years, with an expense ratio of 0.68%.

Its top five holdings are: Nvidia Corp (3.46%), Microsoft Corp (3.15%), Toyota (3.14%), Apple Corp (3.05%) and Alphabet (3.02%).

The fund ‘seeks to invest in companies involved in the development of autonomous vehicle technology, EVs, and EV components and materials’. This includes companies involved in the development of autonomous vehicle software and hardware, as well as companies that produce EVs, EV components such as lithium batteries, and critical EV materials such as lithium and cobalt.

iShares Self-Driving EV and Tech ETF

The iShares Self-Driving EV and Tech ETF has over $268 million in net assets and has returned 8.31% over the past year — and 9.40% a year since inception.

Among the ETF’s top holdings are: Schneider Electric (5.42%), Renault SA (5.29%), and ABB (5.00%).

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’. It has a reasonable MSCI ESG rating of A, and an expense ratio of 0.47%.

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