Auto Sector ETFs: Is It Worth Investing In Cars?

What are the best ETFs on the auto sector? The automotive industry is certainly a fundamental component of the economy and finance.

Despite this, the sector continues to record data in decline. The demand for passenger cars has decreased, and consequently the number of them registrations.

Wanting to see some data, a march 2023 car registrations in Europe recorded a +26.1% when compared with the same month in 2022. It is one of the best months in recent years. We especially had booms in Spain and Italy.

In fact, since mid-2021 we have been witnessing a recovery in the auto sector, both in production and in mobility.

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Automotive sector: an introductory note

When we talk about investing in the car sector, let’s take and analyze those companies that deal directly with the production of cars or their components.

This sector was one of the many heavily penalized by the COVID-19 emergency as after the outbreak of the pandemic there was a blockage of supply chains from China, which then led to a decline in registrations of new vehicles. 2020 was therefore a bad year for the sector.

Since we have witnessed a gradual return to normality, we have also noticed how life has also recovered mobilityand for this very reason it seems that there could be a more favorable moment of recovery for the entire sector.

Experts also predict huge ones investments which should be aimed at the sector; this could be a key point for anyone who decides to look at the auto sector to try to get returns.

In addition the automotive sector it will be one of many that will have to be transformed, to adapt to the new needs and new trends of the sector but also of the economy in general.

We are referring mainly to the trend of electric cars, which will certainly be the one towards which we will have to turn, and towards which it is assumed that the greatest investments will be destined.

We are essentially talking about a sector that has overcome a crisis, and which is now returning to the highest levels, above all thanks to the many new registrations.

But now let’s see what are the best ETFs in the industry!

The best ETFs on Borsa Italiana

Let’s see the two automotive ETFs on Borsa Italiana.

Lyxor STOXX Europe 600 Automobiles & Parts UCITS ETF

This ETF tracks the European autos & parts sector and is benchmarked by the STOXX® Europe 600 Automobiles & Parts.

The ETF was listed at ad August 2006, has a small size, equal to 61 million euro and is characterized by a synthetic replication method. This fund does not have currency hedging.

The domicile of the fund is located in Luxembourg; the ETF has a policy on accumulation dividendsi.e. the coupons of the shares are not redistributed periodically, but are reinvested in the fund itself.

I costs of management amount to 0.30% per annum.

Il risk profile is equal to 6, so it is very risky, since it is almost the maximum possible risk; therefore consider that the guaranteed returns are higher, however with greater risks. The 1-year volatility in EUR is in fact 26.14%.

L’geographical allocation of the index sees Germany with the most shares, equal to 57.08% of the total, followed by Italy with 25.98% and France with 13.83%.

Among the top 10 components of the fund we include well-known names including Volkswagen, Stellantis, Ferrari, Porsche and Renault.

iShares STOXX Europe 600 Automobiles & Parts UCITS ETF

This fund’s benchmark is lSTOXX® Europe 600 Automobiles & Parts index which tracks the European auto and parts sector.

The ETF was listed in the month of July 2002, has an average size of 148 million euros and is characterized by a physical replication method. This fund does not have currency hedging.

The fund is domiciled in Germany and pursues a distribution policyor the coupons are redistributed periodically to investors, at least annually.

I costs of management amount to 0.46% per annum.

Il risk profile is equal to 5so it is a medium risk.

L’geographical allocation of the index sees Germany with the most shares, equal to 56.14% of the total, followed by Italy which owns as much as 25.62% of the shares. In third place we find France with 13.77%.

Among the top 10 components of the fund we include well-known names including Volkswagen, Mercedes, Stellantis, Ferrari and Porsche.

Should you invest in ETFs in the auto sector?

Focusing in particular on the funds examined, we have seen how they have a profile of very high risk, and also one volatility quite high. Surely they are products that guarantee good returns, but in the face of a considerable risk.

Speaking instead of the sector in general, it undoubtedly went through a moment of crisis in conjunction with the pandemic and in 2021, both due to the immediate blockage of mobility and the fact that, being luxury goods, they do not perform during an economic crisis almost never well.

At the moment, however, the sector seems to have recovered, and let us not forget that in any case, despite the crises, the automotive sector and mobility in general will always be at the center of the community’s interest, and for this very reason it will be difficult for it to suffer a definitive collapse .

Furthermore, analyzing the sector, there will be more and more huge investments in the automotive sector, above all in the electric sector and, therefore, in the Electric car ETFs.

The sector of electric mobility seems to be the trpassable end in the future, both thanks to incentives governativi who aim to allocate millions for the green mobility, and thanks to the will and intention to reduce greenhouse gas emissions as much as possible.

So, in conclusion, the choice to focus on a product like this could be considered with a view to diversifying the portfolio and wanting to insert a slightly more promising product but at the same time more risky than the others.

The key is always to aim for diversification!

Additional Resources

For this reason, if you want to invest by diversifying, fine-tuning your strategy, but don’t know where to start investing, then here you can find some free resources to consult:

Good continuation!