From electric mobility and driverless cars to automated factories and ridesharing, these are just some of the major disruptions that the automotive industry had to content itself even prior to the global COVID-19 crisis. Then, the onset of the pandemic curtailed travel, brought about worldwide factory closures and slumping car sales. Yet, the sector has shown tremendous resilience in the wake of both the pandemic and the semiconductor shortage that has plagued this and other industries, so much so that from the economic depths experienced during the spring of 2020, the industry has rebounded, delivering year-over-year growth in new vehicle sales over the last few months across China, Europe and the U.S.
As they navigate the various crises, a handful of automotive leaders have begun to reimagine their operations, shifting towards recurring revenue streams, optimising asset deployment, building a resilient supply chain, while embracing at the same time technological innovations that will help them tap into new, niche markets.
Here are some of the top auto stocks that have left their mark on the industry.
How is the automotive industry recovering?
As the global economy is gradually recovering from the pandemic, auto sales have managed to rebound faster than anticipated, after a 15% decline in 2020 on a global scale. The June-end quarter kicked-off strong in the U.S. with stellar sales figures in April, while sales continue to gather steam as individuals are favouring personal transportation over shared options, even as prices continue to shoot up due to constrained inventories caused by the global semiconductor shortage. According to analysts, vehicle demand is set to rebound between 9% and 13% in 2021.
And the auto business may well be in the biggest transition period it has seen in decades. Demand for electric vehicles (EVs) is soaring as more and more automakers are pledging to focus their attention and resources to producing emissions-free cars, while offering a wider choice of EVs at more affordable prices. However, they also need to meet increasingly tougher and more expensive environmental regulations as several governments have announced rules that would require either plug-in hybris or emissions-free cars by various dates in the near future. For instance, President Joe Biden has vowed that the U.S. will cut greenhouse gas emissions by 50% to 52% below 2005 emissions levels by 2030 and the use of EVs is considered a key to achieving this feat. Indeed, through the infrastructure plan proposed by the President Mr. Biden, the U.S. intends to invest in 500,000 charging stations to serve the EV network.
Top auto stocks
An innovator like no other, Tesla has been lauded for being a game-changer in the automotive industry and for leading the revolution to a more sustainable future on the road thanks to its range of EVs. Indeed, in the two decades it has been around, the company has not only changed our perception of EVs for good, but it has also managed to successfully build a car brand that is competing head on with other motoring giants.
More than $27 billion of the company’s revenue is generated from Tesla’s automotive segment, which includes the design, manufacturing and sales of vehicles. Tesla’s revenue grew to around $31.5 billion in the fiscal year of 2020, marking a 20% increase from the previous year. On the other hand, the EV maker reported record net income of $438 million during the quarter, as well as earnings of $0.93 per share on $10.39 billion in revenue. According to the company, it has managed to weather chip shortages by pivoting to new microcontrollers, while developing, at the same time, firmware for new chips made by new suppliers. Tesla is also strengthening its development in electricity storage through its insight gained from batteries and their power to store electricity. This may be another growing segment for the company which may pay off in the sustainable energy space.
And as if matters couldn’t get any better, in July 3, 2021, Tesla announced that it had produced and delivered more than 200,000 EVs in the second quarter of 2021, a record for the company and more than double its efforts for the same period last year. Of these, almost 99% were Model 3 and Model Y cars. Meanwhile, Tesla shares have gained 13.33% over the past month, outpacing the S&P 500’s gain of 3.52% during the same period. As it approaches its next earnings release, the company is expected to report an EPS of $0.89, up 102.27% from the prior-year quarter.
Interested? Buy Tesla (TSLA) stock here.
The global manufacturer based in Japan is well-known for producing popular vehicles like the likes of the Rav4, Camry and Tacoma across the pond, while the AYGO, Yaris, Corolla and C-HR crossover are among the more favoured models in Europe. It is also a global market leader in sales of hybrid EVs and one of the largest companies to encourage mass-market adoption of hybrid vehicles across the globe.
Toyota’s production capacities have been phenomenal, selling more than 10 million cars every year, around 2.8 million of these in North America. The number did decrease slightly in 2020 due to the pandemic, however it was nonetheless noteworthy to the point that by June 2021, it became the top-selling automaker in the U.S. for the first time ever. Between April and June 2021, it sold 688,813 vehicles, a figure that was just enough for the Japanese carmaker to slide ahead of competitors like General Motors which reported 688,236 domestic deliveries in the second quarter. More specifically, Toyota’s second-quarter deliveries jumped 73% from just 398,029 a year ago when COVID-19 crashed sales, while it also beat its 2019 second quarter U.S. sales volume by 13%. And that’s on top of having the thinnest of inventories in the industries.
Clearly, the company has not only managed to weather the effects of the pandemic, but it is also handling the semiconductor shortage fairly well, allowing it to make big market share gains thanks to its decision to stockpile on key components its cars need, a move it adopted following the Fukushima disaster which severed Toyota’s supply chains in 2011 and lead it to come up with a business continuity plan.
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The company which designs, manufactures and distributes passenger and commercial vehicles, as well as motorcycles, engines and turbomachinery, Volkswagen has maintained the largest market share in Europe for over two decades, while it topped the 2018 Fortune Global 500 list of the world’s largest companies. Its stock has been particularly appealing to retail investors and so far in 2021, it has been going incredibly strong, surging to an all-time high on June 4, trading at €310.
The carmaker closed fiscal year 2020 stronger than expected mainly due to effective crisis management and recovery in its largest single market – China. Sales revenue amounted to €222.9 billion, while operating profit before special items reached a solid level of €10.6 billion. In addition, during 2020 the Group sold 9.2 million vehicles, increasing its global passenger car market share to 13%. The company’s profits surged even further in 2021, with net income at €3.4 billion, a massive improvement from the €517 million euros it earned in the first quarter of 2020.
And as Volkswagen is shifting to EVs, it recently announced that it is selling its Bugatti hypercar business to create a new company jointly owned by the Croatian EV start-up Rimac Automobili and Volkswagen’s sports car unit Porsche AG. Although the deal marks the end of an era for Bugatti after spending two decades under the helm of the German auto giant, the move means that Volkswagen can focus its efforts on its EV roadmap, whereby it aims to offer at least one all-electric or hybrid version of its entire portfolio by 2030. Volkswagen remains the leader in EV sales in Europe.
Interested? Buy Volkswagen (VOW) stock here.
With its Mercedes-Benz cars and vans, Daimler trucks and buses and its mobility division, Daimler is one of the leading global suppliers of premium and luxury cars, as well as one of the world’s largest manufacturer of commercial vehicles. As expected, the challenging environment caused by the COVID-19 pandemic meant that Daimler’s 2020 total unit sales of passenger cars and commercial vehicles decreased by 15%. However, these lower vehicle sales were more than offset by lower costs and cash preservation measures. In fact, the company’s annual net profit in 2020 was up by 48% at €4 billion, whilst EBIT increased by 53% to €6.6 billion.
First quarter performance for this year has been much stronger, with sales increasing by 13% thanks in part to the recovery of the global economy coupled with the company's attractive vehicle portfolio mix, favourable pricing and tailwinds in China. As a result, revenue rose, with adjusted EBIT multiplied to €4,970 million when compared to the €719 million in the first quarter of 2020. As an important development for the company, it announced that it will be spinning off its truck business in order to be able to focus on its passenger car business.
And albeit slow in embracing electric mobility as many of its counterparts have, Daimler is steadily carving a carbon-neutral path for itself. With the aim to manufacture its own battery cells, the company struck a deal back in 2019 with Farasis Energy to buy lithium-ion battery cells, which is also set to build a factory in East Germany to help the Mercedes-Benz maker ramp up electric vehicle production.
As charging infrastructure expansion has been a major hurdle to the mass adoption of battery-powered cars, Daimler has announced that it is joining forces with two other major European truck manufacturers – Volvo and Traton – to form a joint venture so as to develop an electric battery-charging network for long-haul trucks and buses. The companies, which under normal circumstances would be competitors, will be jointly investing €500 million in the venture which is set to begin operations in 2022 and which they will own equally.
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General Motors (GM)
The manufacturer of well-known brands like Chevrolet, Buick, GMC and Cadillac, had a 50% market share in the U.S. at its peak, while it was the world’s largest automaker from 1931 right through 2007. It hasn’t lost much of it clout ever since despite stiff competition. In fact, as of 2020, the company joined the top 20 companies on the Fortune 500 ranking of the largest U.S. corporations by total revenue.
Proving that it can navigate a downturn, General Motors booked net income of $6.4 billion despite pandemic pressures. Meanwhile, it reported revenue of $122 billion in 2020, down from the previous year’s $137 billion, while pre-tax earnings totalled $9.7 billion and profit margins were 7.9%. The third and fourth quarters in particular helped the company recover from an eight-week pandemic-induced shutdown thanks to heavy demand for SUVs, crossovers and trucks.
The company is certainly feeling the semiconductor supply crunch which could cost $2 billion in lost profits, but it has some aces up its sleeve. It’s shifting its relatively scarce stock of semiconductors to scale up production of its higher-margin trucks like the Chevrolet Silverado and the GMC Sierra, both of which are sold in the North American market. The stock has been gaining ever since, remaining up by over 50% year-to-date and as the semiconductor shortage begins to ease, the stock should have more room for further gains.
Closely approaching its next earnings release, analysts expect GM to post earnings of $1.01 per share, marking a year-over-year growth of 302%.
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The third best-selling European automotive brand in the U.S., German luxury automaker BMW boasts the BMW, Mini and Rolls-Royce brands in its portfolio of cars and motorcycles. After dipping to its lowest on March 20, 2020 when it was trading at Є41.37, BMW’s stock has had significant share price movement ever since, gaining immensely and reaching a high of Є94.74 as recently as June 11, 2021.
Similarly, in 2020, the group’s global revenue stood at roughly Є99 billion, with net profit falling 23% last year to Є3.86 billion as the pandemic shuttered factories in the first part of the year. Then, for the first three months of 2021, the BMW Group delivered a total of 636,606 BMW, MINI and Rolls-Royce vehicles to customers and achieved a new all-time high for the first quarter, at an increase of 33.5%, while between January and March, the company increased its sales year-on-year in all major regions of the world. At the same time, sales of electrified vehicles more than doubled in the first quarter, with 70,207 units sold.
But beyond sales numbers and profits, it’s important to remember that BMW is a mature automaker with quite a long history under its belt and a reputation for delivering at all fronts when it comes to luxury vehicles. Impressively, the company has paid more than $8 billion in dividends to its shareholders in the last three years.
With technological innovation at the heart of the company, which has helped it produce stunning, well-engineered cars with powerful engines for the past several decades, now BMW is strongly focusing on the EV market, with ambitious plans to double electric vehicle sales. Its MINI brand is also set to become fully electrified and if successful, this should increase its electric passenger market share in Europe which according to Statista, it currently stands at 1%.
A Dutch-domiciled multinational automotive manufacturing company, Stellantis is among the newest contenders, after it was formed in 2021 following the $52 billion merger between the Italian-American conglomerate Fiat Chrysler Automobiles and French PSA Group. The fourth-largest automaker by volume, the company designs, develops, manufactures and sells a range of vehicles bearing the Alfa Romeo, Chrysler, Citroen, Dodge, Abarath, DS, Fiat, Jeep, Lancia, Maserati, Mopar, Opel, Vauxhall, Peugeot and Ram brands, while the name Stellantis is used exclusively to identify the corporate entity.
With listings on Milan’s Borsa Italiana, on the Euronext Paris and on the New York Stock Exchange, the stock jumped by more than 11% on its trading debut on the New York Stock Exchange and it has been on a relatively high momentum ever since. By June 15, 2021, the stock has gained 23.5% over the past 12 weeks.
Stellantis’ car sales have also been positive, so much so that it took the top spot in global European sales in Q1 of 2021, with a market share of 23.6% in the Passenger Cars and Light Commercial Vehicles perimeter. As for the second quarter, the company reported a 32% increase in its U.S. sales compared with the same period in 2020, with the Jeep brand, in particular, recording a 19% increase in total sales year-over-year. On the other hand, the Ram brand wasn’t far behind, with the automaker selling a total of 187,750 units, a 47% increase on a year-over-year basis.
It’s time to buy Stellantis (STLA).
When NIO was founded in 2014 and came into the scene, it had little experience in vehicle manufacturing, but it promised a bright future, as proclaimed by the Chinese version of its name, Weilai, which means blue sky coming. In less than 10 years, the company has managed to catapult itself into the spotlight thanks to its disruptive effect in the Chinese automotive market, becoming one of the country’s largest EV makers and recognised as one of Tesla’s largest and true challenger.
Once on the brink of bankruptcy, the so-called Tesla of China has also been among those automakers which have managed to shake off the chip shortage, delivering 8,083 vehicles in June, bringing the total for the second quarter to 21,896 cars. Impressively, the June figures also brought deliveries for the first half of the year to more than 41,900, close to surpassing the total for all of 2020. Meanwhile, its shares are up 9% so far this year, while in the past year it has gone up 440%.
And while its cars may only be seen on the roads of China, now NIO is setting its sight on Europe, with plans to sell its electric cars in Norway. The carmaker is set to deliver the latest version of its ES8 all-electric six and seven-seater sports utility vehicle in the country by September. According, to NIO, Norway was selected specifically due to the country’s aggressive adoption of EVs, however, the move will help it foray into other European markets.
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The Japanese conglomerate that manufactures cars, motorcycles and power equipment, Honda has been the world’s largest motorcycle automaker since 1959, reaching production of 400 million units by the end of 2019. In addition, it is a leading manufacturer of internal combustion engines measured by volume after producing more than 14 million each year.
After rallying 29% since the end of fiscal 2020 which ended in March 2020, analysts believed that Honda’s stock reached its near-term potential, however, it proved them wrong when it managed to grow from around $22 at the end of fiscal year 2020 to $33.20 on June 4, 2021. One more Asian automaker to achieve robust U.S. sales rise in the month of June as it shrugged off supply constraints, Honda set a new sales record for the month after it sold 153,122 units, climbing 33.4% on a yearly basis. And so far, it has generated net sales of around 13.2 trillion Japanese yen in the fiscal year of 2021.
The carmaker became the latest to promise an emissions-free future, as it aims to sell battery-electric cars and fuel cell electric vehicles by 2040 in the three major markets where it sells its cars – China, Japan and North America. But what sets Honda apart from the crowd is that it’s not only ramping up future electric vehicles but it is also hopping to follow suit with its motorbikes. Honda revealed that it plans to have at least four new electric bikes on the market by 2024, while it has also signed a deal with Yamaha, Suzuki and Kawasaki for a standard specification for swappable electric bike batteries.
How to invest in auto stocks
Ready to buy a share of these top auto stocks? Your first step to tapping into a world of investment opportunities with Moneybase Invest is to sign up and open an account.
- Download the app from either Google Play or the Apple App Store. Alternatively, you may access Moneybase Invest on your desktop by visiting https://live.cctrader.com/
- Once you’ve onboarded successfully and have funded your account, head over to the search bar at the top of your screen and input either the company name or ticker symbol.
- Select the instrument of your choice from the list and then click on the Buy button on the window located at the bottom of your screen.
- On the New Order page, input the number of shares you would like to purchase and hit the Place Buy Order. The stock has been added to your portfolio.
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