We were hoping for flying cars, but all we got is 280 characters – a popular lament suggesting relative technological stagnation in all tech sectors that’s not IT.
True, we’re unlikely to drive flying cars on autopilot anytime soon. But the #automotive industry is, without a doubt, ripe at the cusp of change.
#Ford, #GeneralMotors, #Tesla, #Deere & Co., and #Honeywell International are among the key listed players in the US, while #Toyota, #Volkswagen, #BYD and #Daimler are among the leading global players by market value.
If you’re looking to own stocks in this sector, it's useful to understand some of the key factors influencing stock performance. So let’s take a look:
- Economic cycle: The automotive industry is highly cyclical, meaning when the economy is doing well (employment rates are high, stable inflation, high retail sales, etc.) the industry will also do well. However, the companies see a decline in their sales and stock prices when the economy suffers. The industry is also seasonal and tends to see peak demand in spring and fall and low sales in winter months.
- Government regulations: The government has regulations in place for a range of things that ultimately impact the auto company’s costs and hence profits. Everything from design and safety features to how the car is marketed and sold is regulated.
- Interest rate changes: The automotive sector relies heavily on debt. When Interest rates rise, it becomes expensive for consumers to opt for financing, which leads to a decline in consumer demand. On the other hand, low interest rates make cars more affordable for consumers, leading to an increase in consumer demand.
- Transition to EVs: Estimates predict that more than 50% of all new cars sold by 2030 will be EVs. Over the last couple of years, the EV market has been growing rapidly as improvements in battery life, efficiency, and affordability make EVs a desirable option. Companies focusing on this segment will see the benefits in increased revenue, market share, and stock value in the long term.
- Autonomous vehicles: Another exciting shift in the industry is the adoption of self-driving or autonomous vehicles. While every ‘autonomous’ accident is tragic, the number of accidents averted by the use of self-driving vehicles is harder to measure without data emerging from widespread use. As safety features and self-driving algorithms improve, an increase in adoption is likely despite initial regulatory roadblocks.
With the penetration of EVs set to increase throughout the globe, self-driving cars to open to the public, and newer business models to significantly increase the industry’s revenue, stocks of automobile & auto parts companies remain bankable bets.
So, #Investing in the #automotive industry? Get invested in high-performing #USstocks seamlessly on Appreciate.
