Top Automotive Stocks Worth Investing in by 2025
Top Automotive Stocks Worth Investing in by 2025
The automotive sector is extensive and widely recognized. Various individuals are conversant with automotive brands and often express preferences for the latest vehicles available in the market.
Due to this sector's visibility, it has attracted the attention of investors for several decades. This piece will focus on automotive stocks and offer insightful investment strategies.
Leading Automotive Stocks
Top Automotive Stocks in 2025
Prominent automotive stock companies include:
| Automotive Company | Description || --- | --- || Ford Motor Company (NYSE:F) | Ford is renowned for its market dominance in pickup trucks and commercial vehicles, with worldwide operations. Currently, the company is focusing on electric and autonomous vehicles to maintain its lead. However, due to high-interest rates, EV growth has been delayed in recent years. Ford is working on reducing costs and expanding EV capacity to increase profitability. || Ferrari NV (NYSE:RACE) | Ferrari is a small Italian manufacturer recognized for its high-end sports cars and racing victories. Its strong brand and long waiting list provide pricing power and high-profit margins for luxury vehicles. || Tesla (NASDAQ:TSLA) | Tesla, pioneer of "premium electric vehicles," has become the world's most successful EV manufacturer. The company is dominating the U.S. EV market and has aspirations for ongoing EV sales, robotaxis, and self-driving technology under Elon Musk's leadership. || Stellantis (NYSE:STLA) | Stellantis was formed via a 2021 merger of Fiat Chrysler and Peugeot. Its brand portfolio includes Jeep, Ram, Dodge, Opel, Vauxhall, and Peugeot, as well as Fiat, Alfa Romeo, and Maserati brands, with strong operations in Europe, South America, and the U.S. || Volkswagen (OTC:VWAGY) | Volkswagen is a global best-selling automaker outside of the U.S., with a diverse portfolio of brands like VW, Skoda, and SEAT, and luxury brands like Audi, Lamborghini, Porsche, and Bentley. || Toyota Motor (NYSE:TM) | Established in 1937, Japanese automaker Toyota is renowned for its big-selling vehicle brands, including Toyota, Lexus, Daihatsu, and Hino. Toyota is the largest vehicular brand worldwide in terms of sales. || General Motors (NYSE:GM) | General Motors, the largest car company in the U.S. in terms of sales, is responsible for brands like GMC, Buick, Chevrolet, and Cadillac. |
The Automotive Industry
The Automotive Industry
The automotive sector has several stock types:
- Automakers, which produce cars, trucks, and SUVs, including electric vehicles (EVs)
- Auto parts suppliers, offering various components, such as seats, spark plugs, electronic systems, tires, and batteries for EVs
- Auto dealer organizations
- Auto parts retailers
Evaluating an Automotive Stock
Assessing Automotive Stocks
Automotive stocks belong to the consumer durables sector, which includes companies that manufacture products designed to last longer than a few years, such as washing machines, dishwashers, and furniture, along with cars and trucks.
Ford Motor Company (NYSE:F)
Before investing in automotive stocks, it's crucial to understand the impact of economic cycles on automotive companies and how they manage their profitability during good and bad economic periods.
The Auto Sales Cycle
Investors know this automaker as a longtime market leader in pickup trucks and commercial vehicles, with operations all over the world. Ford is now investing in electric and automated vehicles to help it maintain that lead. However, relatively high interest rates have held back EV growth in recent years, and Ford is focusing on reducing costs and EV capacity to try to make its EVs profitable.
Understanding the Auto Sales Cycle
Auto manufacturers and suppliers are cyclical stocks, meaning their profits rise and fall based on consumer confidence. This cyclicality may impact investors as declining consumer confidence can cause businesses and consumers to postpone car purchases.
During recessions, automakers and suppliers may experience declining profits, which can impact their ability to invest in new products and remain competitive.
One strategy to avoid the cyclicality in the industry is to buy stocks that focus on the replacement market, such as auto parts retailers or manufacturers that cater to the secondary market.
Ferrari NV (NYSE:RACE)
Cash Reserves
Cash Reserves
This small Italian automaker is known for its expensive sports cars and years of racing success. Ferrari’s strong brand and its long waiting list give it great pricing power and luxury-level profit margins.
Most automotive companies significantly cut product investments during the 2008-09 recession. Companies that didn't, like Ford and Hyundai, had new products available when recovery began and gained market share.
The lesson learned by the industry was to maintain substantial cash reserves during recessions to continue product development and remain competitive. Many automakers even opted to invest in EVs during the COVID-19-induced recession.
Financial Statement Analysis
Understanding Automotive Companies' Financial Statements
Tesla (NASDAQ:TSLA)
Understanding a car company's financial statements is essential for informed decision-making. By analyzing these statements, investors can assess the company's financial health, growth potential, and potential risks.
This includes:
The pioneering maker of “premium electric vehicles” has grown to be the world’s most profitable EV automaker, and it dominates the U.S. EV market. Investors clearly expect great things from CEO Elon Musk and his team, and that includes ongoing EV sales, robotaxis, and full self-driving (FSD) technology.
- Income statements, which demonstrate revenues, expenses, and profits/losses
- Balance sheets, which provide a snapshot of a company's assets, liabilities, and shareholder equity
- Cash flow statements, which reveal cash inflows and outflows
By carefully reviewing these financial documents, investors can make informed decisions about which automotive stocks to invest in.
Automotive corporations' financial reports aren't typically complex to comprehend. Here are three key points to keep in mind:
- Auto investors often focus on a company's operational income, or EBIT (earnings before interest and taxes), as well as operational or EBIT margins (determined by dividing earnings by total revenue) and cash flow. These metrics include the expenses directly related to manufacturing and delivering vehicles, such as production costs and research and development expenditures (which can be substantial in the automotive sector), while excluding interest expenses and taxes less directly associated with the company's ongoing performance.
- Automakers frequently offer modified figures that exclude the effects of one-time charges and advantages, such as write-offs and tax benefits. These corrected figures are beneficial for evaluating a business's fundamental performance. However, it's important to note that one-time charges and advantages can also be significant.
- Many automakers have subsidiaries that serve as finance companies, offering loans and leases to clients and dealers. These subsidiaries can complicate automotive financial reports for investors. To facilitate understanding, most automakers provide distinct debt and cash flow figures that pertain strictly to their core vehicle-making operations, often called "automotive" or "industrial" numbers. These figures allow investors to assess a car company's debt and compare it between companies.
Stellantis (NYSE:STLA)
Competition
Competition within the Automotive Industry
Formed in 2021 by the merger of Fiat Chrysler and Peugeot, this automaker's brands include Jeep, Ram, Dodge, Opel, Vauxhall, and Peugeot. It also owns the Fiat, Alfa Romeo, and Maserati brands, and it has strong operations in Europe and South America, as well as the U.S.
Generally, the automaker with the latest innovations commands the highest prices and profits. To maintain a steady flow of new products, automakers must invest consistently.
Nearly all automakers and several parts suppliers are also investing heavily in future technologies, such as electric vehicles, enhanced safety features, and autonomous driving systems. Experts widely believe that these technologies are essential for automakers to remain competitive in the forthcoming years.
Electric Vehicles
Electric and Hybrid Electric Vehicles
Volkswagen (OTC:VWAGY)
Notable opportunities in the coming years will involve manufacturers of electric and hybrid electric vehicles. These developments are novel and, according to most analysts, will progressively replace internal combustion vehicles.
Manufacturers of electric and hybrid vehicles may experience substantial growth, which is exciting for investors. However, it's essential to remember that the processes involved in developing and manufacturing electric vehicles are not significantly different from those employed by traditional internal combustion engine vehicle manufacturers. This means that electric vehicle manufacturers still encounter high costs, similar to their traditional counterparts.
Volkswagen is one of the best-selling automakers outside the U.S. Its portfolio of brands includes VW, Skoda, and SEAT, plus the Audi, Lamborghini, Porsche, and Bentley luxury brands.
It's also important to keep in mind that major traditional automakers are also introducing electric vehicles and are actively competing in this segment of the market.
Competition in this sector has become fierce due to a combination of relatively high interest rates, which have slowed the growth of electric vehicle unit sales, and negatively impacted pricing as competition intensifies. As a result, the focus in recent times has been on reducing costs and decreasing capacity where necessary.
Related Investment Topics
Investing in Top Consumer Discretionary Stocks
Toyota Motor (NYSE:TM)
When people have some extra income, they often indulge in offerings from these companies.
The 10 Best Stocks to Buy and Hold Now in January 2025
Established in 1937, the Japanese automotive giant's portfolio of brands includes Toyota, Lexus, Daihatsu, and Hino. The power of its brand and its global footprint make Toyota the largest car brand in the world in terms of sales.
Get a list of the best companies to own for the long term.
Best Retail Stocks to Buy Now
We all shop. These companies offer a wide range of products across various industries.
Investing in Metal Stocks
General Motors (NYSE:GM)
An in-depth look at the metals sector and some metal stocks worth investing in.
Are Automotive Stocks a Good Fit for You?
Owner of the GMC, Buick, Chevrolet, and Cadillac brands, GM is the largest car company in the U.S. in terms of sales.
Suitability of Automotive Stocks for Your Portfolio
Automotive stocks can contribute significantly to your investment portfolio. Since their values often mirror consumer confidence, they can serve as indicators of potential economic challenges or improvements.
Investing in an automotive company implies supporting their long-term strategy for hybrid and electric vehicles. However, it's become increasingly challenging to judge this strategy as the growth rate of electric unit sales has slowed, and intensifying competition has negatively impacted pricing.
FAQ
Automotive Stock FAQ
Which is the best automotive stock to invest in?
Investors often prefer stocks of companies with powerful electric vehicle brands, like Tesla, at a premium. Meanwhile, traditional internal combustion engine manufactures are generally discounted. Ultimately, the successful stocks will be those that align with the transition to hybrid and electric vehicles.
Which automaker has the fastest growth rate globally?
China's BYD (OTC: BYDDY) is the world's largest electric vehicle manufacturer in terms of unit sales and is experiencing rapid growth.
Which automakers are publicly traded in the United States?
Major players like Toyota, General Motors, Ford, and Stellantis maintain multiple brands. Other notable brands with U.S. listings include Tesla, Honda (NYSE: HMC), Li Auto (NASDAQ: LI), Rivian (NASDAQ: RIVN), VinFast (NASDAQ: VFS), Nio (NYSE: NIO), Lucid (NASDAQ: LCID), and XPeng (NYSE: XPEV). Lesser-known automakers such as NWTN (NASDAQ: NWTN) and Polestar (NASDAQ: PSNYW) are also publicly traded in the United States.
What automakers are listed on the S&P 500?
Tesla, Ford, and General Motors are all members of the S&P 500 index.
John Doe holds no stake in the shares mentioned below. Our platform endorses Tesla's shares and recommends investing in General Motors, Stellantis, and Volkswagen Ag. Our platform suggests purchasing January 2025 $25 call options for General Motors. Our platform operates under a strict disclosure policy.
In light of the focus on automotive stocks and investment strategies, two additional sentences that contain the words ['finance', 'money', 'investing'] could be:
- With the rise of electric vehicles, investors should consider allocating a portion of their investment portfolio to finance companies that specialize in lending for EV purchases, as this market segment is expected to significantly grow in the next few years.
- For those interested in more passive investment opportunities in the automotive sector, Exchange Traded Funds (ETFs) focused on automotive companies or the broader consumer discretionary sector can provide diversified exposure to the industry, allowing for money to be invested with minimal time and effort required for individual stock selection.