ETFs Poised to Ride the Software-First Automaker Boom: China Manufacturers Lead the Way

Investors in ETFs are looking for exposure to software-first vehicle manufacturers. China-based manufacturers have an average 53% digital score, outpacing US counterparts. Funds with high China EV exposure, such as KraneShares Electric Vehicles & Future Mobility ETF (KARS), reflect the ascent of digital-native EV manufacturers. Legacy automakers, including Hyundai-Kia and Stellantis, may also benefit from over-the-air updates and AI-driven features. ETFs with both legacy and next-gen players, like iShares Self-Driving EV and Tech ETF (IDRV), allow investors to hedge the risk of a comeback.

Title: Navigating the Software-First Automaker Boom: ETFs Offering Exposure to Digital-Native and Legacy Players

Investors in ETFs are increasingly seeking exposure to software-first vehicle manufacturers, a trend driven by the growing importance of digital features and recurring revenue models. According to the Gartner Digital Automaker Index 2025, manufacturers that can integrate software platforms into their vehicles are poised to lead the next decade [1].

China-based manufacturers have an average digital score of 53%, significantly outpacing their U.S. counterparts at 50% and outpacing Europe (33%) and Japan (26%) [1]. Companies like Nio Inc (NYSE:NIO), XPeng Inc (NYSE:XPEV), Xiaomi Corp (OTCPK: XIACF), Li Auto Inc (NASDAQ:LI), and Geely Automobile Holdings Ltd (OTCPK: GELYF) are among the largest movers in this digital revolution [1].

For investors looking to capitalize on this trend, ETFs with high China EV exposure are of particular interest. The KraneShares Electric Vehicles & Future Mobility ETF (NYSE:KARS) offers heavy exposure to Nio, BYD Co Ltd (OYCPK: BYDDF), Li Auto, and XPeng, making it a direct play on Gartner’s digital leaders [1]. Meanwhile, the Global X Autonomous & Electric Vehicles ETF (NASDAQ:DRIV) provides a more diversified portfolio, including U.S. players like Tesla Inc (NASDAQ:TSLA) and suppliers such as Nvidia Corp (NASDAQ:NVDA) and Qualcomm inc (NASDAQ:QCOM) [1].

Legacy automakers are also positioning themselves to benefit from over-the-air updates and AI-driven features. Gartner highlighted Hyundai-Kia and Stellantis NV (NYSE:STLA) as potential winners in this space [1]. ETFs like the iShares Self-Driving EV and Tech ETF (NYSE:IDRV) and the First Trust S-Network Future Vehicles & Tech ETF (NASDAQ:CARZ) offer exposure to both legacy and next-gen players, providing investors with a hedge against the comeback potential of traditional automakers [1].

As the vehicle industry transitions from batteries to bytes, subscription software, connected features, and AI assistants are becoming the next huge revenue drivers. ETFs with a higher weighting towards Chinese digital-first automakers could offer more pronounced upside, while balanced funds provide safer exposure if legacy OEMs manage to catch up [1].

Investors should remain vigilant about the evolving landscape of the EV market and consider the risks associated with both digital-native and legacy players. By diversifying their portfolios with ETFs that offer exposure to a mix of these players, investors can position themselves to benefit from the software-first automaker boom.

References:
[1] https://www.inkl.com/news/from-tesla-to-nio-etfs-poised-to-ride-the-software-first-automaker-boom
[2] https://www.ainvest.com/news/bitcoin-news-today-blackrock-crypto-etfs-attract-1-billion-inflows-market-pullback-2508/
[3] https://www.cryptopolitan.com/xiaomi-plans-european-ev-market-debut/