Over the past few months, I have written many research notes on future mobility (which includes both electric vehicles and autonomous vehicles — there is a difference). One of the biggest issues that I’ve seen is the divergence between the newer, emerging EV stocks (which have just started production) and the legacy automakers (which have been contributing to the majority of EV growth, along with Tesla). But what does that mean for electric vehicle ETFs? ETFs usually track indexes with relatively conservative methodologies relative to minimum market cap restrictions and trading volume. And so, many of these newer, emerging stocks are not yet included. Instead, these ETFs hold legacy automakers. They also hold a large allocation to technology stocks like semiconductors, which play an integral role in future mobility. This note looks at what is inside future mobility ETFs, including sectors, industries, geographies, and specific stocks.
Future mobility ETFs are heavily weighted toward consumer discretionary and information technology sectors.
At this point, there are no longer any traditional automobile ETFs. (CARZ ), for example, was previously the First Trust NASDAQ Global Auto Index Fund but changed its name and methodology to focus on electric and autonomous vehicles in 2022. But for future mobility ETFs, auto stocks — which are part of the consumer discretionary sector — are only about 1/5 of the holdings, on average. Out of the eight ETFs listed, four have almost twice as much weight in semiconductor stocks compared to auto stocks. Two have only slightly fewer semiconductor stocks than auto stocks. Only one ETF has zero semiconductor stocks and focuses more closely on auto and auto components. Semiconductor stocks and related tech stocks are also in broader technology indexes and many other thematic ETFs. They are also significant players in the early stages of future mobility. As more vehicles are produced and smaller EV companies gain market cap, the ratio of auto versus semiconductor may reverse.
Most future mobility ETFs are global, holding stocks from China, Japan, South Korea, Germany, and others.
Future mobility ETFs are global, but many have large allocations to U.S. stocks. U.S. holdings in future mobility ETFs include large-cap companies like (NVDA), (TSLA), (AAPL), (GOOGL), and (INTC). Six out of eight of the ETFs have NVIDIA in their top ten holdings — usually as the very top holding. While some legacy auto companies are from the U.S., like (F) and (GM), many are international stocks, like Toyota and Honda from Japan and Volkswagen from Germany. Many of the EV-focused companies that are large enough to be included in an ETF are Chinese stocks like (LI), (NIO), and (XPEV).
Future mobility ETFs reflect the early stages of the future mobility industry. Most of the focus is currently on growing the underlying technology. Vehicle production should significantly increase over the next few years, which may eventually change the constituent weightings. Few pure-play future mobility stocks are mostly newer, emerging small-cap stocks. A more conservative investor may want to invest in the future mobility theme through an ETF rather than stock-picking. ETFs can evolve along with the industry.
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