The Best (and Only) Auto ETF for Q1 2022

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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.

Key Takeaways

  • 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 AG.

There is only one distinct auto ETF that trades in the United States excluding inverse and leveraged funds as well as those with under $50 million in assets under management: 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.

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 1-year trailing total returns of 62.2% as compared with 32.1% for the S&P 500. 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 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 that First Trust Advisors announced on Nov. 2, 2021 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 AssetsDescription 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 AG (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
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 all-terrain vehicles
Nissan Motor Co. Ltd. (7201:TKS)3.9%Manufacturer of cars and trucks

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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