Automotive exchange-traded funds (ETFs) provide exposure to the performance of companies within the global automobile industry. The auto industry includes companies that manufacture cars, trucks, vans, and commercial vehicles, as well as companies that supply automobile parts.
Auto ETFs are composed of a basket of automobile equities, enabling investors to profit from the broader growth of the auto industry while avoiding the idiosyncratic risk associated with a single company.
- The auto industry dramatically outperformed the broader market over the past year.
- The best (and only) auto exchange-traded fund (ETF) is CARZ.
- Its top three holdings are Tesla Inc., General Motors Co., and Daimler A.G.
Only one distinct auto ETF trades in the United States, excluding inverse and leveraged funds as well as those with less than $50 million in assets under management (AUM): the First Trust NASDAQ Global Auto Index Fund (CARZ).
There is a second ETF in this area: the Simplify Volt RoboCar Disruption and Tech ETF (VCAR). However, this ETF launched in December 2020 and thus has not been around long enough to be judged according to Investopedia’s metrics. It also has very low AUM as of this writing, making it a risky investment, and it is geared toward profiting from niche autonomous driving technology trends rather than offering exposure to the overall auto sector.
The automobile industry, as represented by the benchmark S&P 1500 Automobiles Industry Index, has significantly outperformed the broader market in the past year. The index has provided one-year trailing total returns of 62.2%, compared with 32.1% for the S&P 500. However, we note that this index includes only U.S. companies, while CARZ has a global focus, so it is not a perfect metric.
These performance figures above and all data below are as of Nov. 11, 2021.
- Performance Over One-Year: 43.9%
- Expense Ratio: 0.70%
- Annual Dividend Yield: 0.73%
- Three-Month Average Daily Volume: 16,132
- Assets Under Management: $77.4 million
- Inception Date: May 9, 2011
- Issuer: First Trust
CARZ tracks the Nasdaq OMX Global Automobile Index, a modified market capitalization-weighted index that gauges the performance of the largest and most liquid automobile manufacturers. Companies in the index must have a minimum worldwide market cap of $500 million, be listed on an eligible global stock exchange, and have a minimum three-month average daily dollar trading volume of $1 million.
The index’s methodology means that larger companies receive bigger weighting, although caps are put in place to prevent high concentrations. A special note: On Nov. 2, 2021, First Trust Advisors announced that CARZ will start tracking a new index, the S-Network Electric & Future Vehicle Ecosystem Index, by the end of January 2022.
Given its narrow focus on the highly cyclical auto industry, CARZ is likely to have less appeal within a buy-and-hold investment strategy. But it may be useful for providing tactical exposure to the auto industry over the short term. The fund follows a value-centric strategy, focusing on stocks that look relatively cheap compared to the rest of the sector.
Below is a closer look at CARZ’s 10 largest holdings.
|First Trust NASDAQ Global Auto Index Fund (CARZ) Top 10 Holdings|
|Company Name (Ticker)||Percent of CARZ Assets||Description of Company|
|Tesla Inc. (TSLA)||10.6%||Electric vehicle manufacturer and clean-energy company|
|General Motors Co. (GM)||8.8%||Manufacturer of automobiles, trucks, and commercial vehicles|
|Daimler A.G. (DAI:ETR)||8.8%||Manufacturer of cars, trucks, and vans|
|Toyota Motor Corp. (7203:TKS)||7.4%||Manufacturer of cars, trucks, minivans, and commercial vehicles|
|Honda Motor Co. Ltd. (7267:TKS)||6.9%||Manufacturer of automobiles, motorcycles, and all-terrain vehicles (ATVs)|
|Ford Motor Co. (F)||5.4%||Manufacturer of automobiles, trucks, and commercial vehicles|
|BYD Co. Ltd. Class H (1211:HKG)||4.1%||Manufacturer of electric and hybrid cars and trucks|
|Bayerische Motoren Werke AG (BMW:ETR)||4.1%||Manufacturer of luxury vehicles and motorcycles|
|Suzuki Motor Corp. (7269:TKS)||3.9%||Manufacturer of automobiles, motorcycles, and ATVs|
|Nissan Motor Co. Ltd. (7201:TKS)||3.9%||Manufacturer of cars and trucks|
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