What Is an Auto Industry ETF?
The auto industry ETF is an exchange-traded fund that invests primarily in manufacturers and suppliers of automotive products. An ETF is a type of security that tracks an index or sector and can be purchased or sold on a stock exchange just like shares of a regular stock.
- An auto industry ETF is an exchange-traded fund that tracks the stocks of the auto industry.
- The auto industry includes companies that manufacture cars, trucks, vans, and commercial vehicles. It also includes companies that supply automobile parts.
- The only exclusive auto industry ETF currently available trades under the ticker symbol CARZ.
Understanding Auto Industry ETFs
The automotive industry ETF consists of a group that contains manufacturers of all automobile-related products, including but not limited to, parts and labor. Due to the number of automotive companies within the United States and across the globe, many of these exchange-traded funds may have a global reach as well. Asia and Europe both have a strong market presence in the industry.
Some of the products held in these funds include research and development, distribution of materials, and the sale of automobiles themselves.
In a bull market, automotive stocks rank higher as they are tied to development and production in the economy, by showing increased consumer spending. New automobiles are a significant purchase that many people put off until they are financially stable enough to do, so thanks to the increasing availability of other options. Most urban areas have extensive public transportation systems. Even rural areas are now seeing an increase in newer transportation initiatives like ridesharing, and companies like Uber and Lyft that provide taxi services where they did not previously exist, or where there was a greater demand for them.
Example of Auto Industry ETF: CARZ
The First Trust Nasdaq Global Auto Index Fund ETF (CARZ) remains the only exchange-traded fund that is focused exclusively on the auto industry sector, only investing in companies that are classified as auto manufacturers. CARZ is managed by First Trust Portfolios L.P.; and while First Trust is a U.S based company, the fund is global and not limited to investing in securities located within the United States. The ETF was first created in 2011 and carries an expense ratio of 0.70%.
CARZ's portfolio only includes companies with more than a $500 million market cap and also requires that included securities meet the minimum three-month daily trading average of $1 million, and these securities must be listed on an index-eligible stock exchange. CARZ currently has 34 equities in their group that meet this standard.
|First Trust NASDAQ Global Auto Index Fund (CARZ) Top 10 Holdings (Q1 2021)|
|Company Name (Ticker)||Percent of CARZ Assets||Description of Company|
|Tesla Inc. (TSLA)||9.9%||Electric vehicle manufacturer and clean energy company|
|General Motors Co. (GM)||8.2%||Manufacturer of cars and related parts|
|Daimler AG (DAI:ETR)||7.9%||Manufacturer of cars, trucks, and vans|
|Toyota Motor Corp. (7203:TKS)||7.3%||Manufacturer of cars, trucks, minivans, and commercial vehicles|
|Honda Motor Co. Ltd. (7267:TKS)||6.7%||Manufacturer of automobiles, motorcycles, and all-terrain vehicles|
|KIA Motors Corp. (000270:KRX)||5.7%||Manufacturer of passenger cars, mini-buses, trucks, commercial vehicles, and auto parts|
|BYD Co. Ltd. (class H shares) (1211:HKG)||4.5%||Manufacturer of passenger cars, commercial vehicles, and other automotive products|
|Hyundai Motor Co. (005380:KRX)||4.5%||Manufacturer of motor vehicles and related parts|
|Geely Automobile Holdings Ltd. (175:HKG)||4.3%||Manufacturer of passenger vehicles|
|Ford Motor Co. (F)||4.2%||Manufacturer of cars, trucks, and related parts|