The auto industry accounts for 4% of global GDP and its share of economic activity is expected to continue growing. According to Statista.com, in 2017 the global industry was worth $5.3 trillion and this is expected to grow to $8.9 trillion by 2030.
Within the auto industry, there are a variety of types of companies: auto manufacturers, car dealerships, auto parts and service companies, etc. Many of these companies have experienced impressive returns over the past couple of years and there’s no reason to think that this momentum should slow down in 2022.
One catalyst for the auto industry is that production is expected to return to full capacity by the end of the year. Due to a global chip shortage, auto production has been running at about 60% of total capacity on a global basis. This is leading to rising prices for vehicles and a shortage of used cars. However, recent commentary from management teams seems optimistic that the situation is improving.
On a longer-term scale, the automotive industry is in the early stages of a massive transformation. Two emerging trends – electric vehicles and autonomous driving – are going to revolutionize the auto industry. In the not too distant future, it’s predicted that the majority of vehicles sold will be powered by electricity, rather than internal combustion engines (ICE). Already, technology like algorithms, connectivity, and cameras are being utilized to make cars safer, and the ultimate end-game is fully autonomous vehicles.
Due to the demand for this new technology and the “return to normal” after the coronavirus pandemic subsides, now could be a great time to invest in the auto industry. In this article, we evaluate 5 companies that we think stand to outperform in 2022: Honda Motor Company Ltd. (HMC), Volkswagen (VWAGY), AutoZone Inc. (AZO), Genuine Parts Company (GPC), and AutoNation Inc. (AN).
Let’s take a look at the auto industry before we analyze these 5 stocks:
History of the Automotive Industry
While the automotive industry officially started near the end of the 19th century, it didn’t take off until Ford (F) created the first Model T in 1913. The car was manufactured on an assembly line, which was considered groundbreaking technology at that time. It made cars more affordable for consumers while allowing the company to scale production without a loss of quality.
Since then, the industry has seen the number of automakers explode with car companies all over the world. Regular cars were joined by trucks, SUVs, and campers. Traveling became more accessible, and cities grew larger due to the automobile. Now the automotive industry includes not only auto manufacturers but also auto parts companies and auto dealers.
Plus, other industries depend on cars for sales. For instance, energy companies produce oil for cars, and almost every industry relies on trucks to get their products from suppliers to stores. There are approximately 1.5 billion cars globally, and