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. Well-known names in the industry include Tesla Inc. (TSLA), now the world’s largest automaker by market value, Ford Motor Co. (F), Toyota Motor Corp. (TM), and General Motors Co. (GM).
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., Toyota Motor Corp., and Daimler AG.
There is only one distinct auto ETF that trades in the United States and has been in existence long enough to have a one-year trailing total return: 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 assets under management (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.
CARZ is the best-performing (and only) auto ETF. It has comfortably outperformed the broader market over the past 12 months, with a total return of 72.7% compared to the S&P 500’s total return of 34.5%. These performance figures and all data below are as of Aug. 6, 2021.
- Performance Over One-Year: 72.7%
- Expense Ratio: 0.70%
- Annual Dividend Yield: 0.69%
- Three-Month Average Daily Volume: 18,255
- Assets Under Management: $64.3 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.
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)||8.6%||Electric vehicle manufacturer and clean-energy company|
|Toyota Motor Corp. (7203:TKS)||8.2%||Manufacturer of cars, trucks, minivans, and commercial vehicles|
|Daimler AG (DAI:ETR)||7.4%||Manufacturer of cars, trucks, and vans|
|General Motors Co. (GM)||7.1%||Manufacturer of cars and related parts|
|Volkswagen AG Preferred (VOW3:ETR)||6.7%||Manufacturer of cars and sport-utility vehicles (SUVs)|
|BYD Co. Ltd. Class H (1211:HKG)||5.9%||Manufacturer of electric and hybrid cars and trucks|
|Geely Automobile Holdings Ltd. (175:HKG)||5.3%||Manufacturer of passenger vehicles|
|Great Wall Motor Co. Ltd. Class H (2333:HKG)||5.0%||Manufacturer of SUVs and pickup trucks|
|Nissan Motor Co. Ltd. (7201:TKS)||4.3%||Manufacturer of cars and trucks|
|Honda Motor Co. Ltd. (7267:TKS)||4.1%||Manufacturer of automobiles, motorcycles, and all-terrain vehicles|
The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.
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YCharts. “Financial Data.” Accessed Aug. 10, 2021.
First Trust. “First Trust NASDAQ Global Auto Index Fund (CARZ).” Accessed Aug. 10, 2021.
ETF Database. “CARZ: First Trust NASDAQ Global Auto Index Fund.” Accessed Aug. 10, 2021.