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Investing in car stocks

Demand can be inconsistent but opportunity may lie within the emerging electric vehicle market.

Car stocks offer investors the chance to back companies with international renown. But the global performance of this industry can be inconsistent and isn’t immune to market-impacting events.

What are car stocks?

Car stocks are stocks from companies involved in the production of automotive vehicles. This investment category includes major commercial automakers, like Ford, General Motors, Toyota, heavily traded but relative newcomer Tesla, and others. It also includes companies that produce emergency vehicle equipment, signaling devices, military vehicles and specialty trucks.

How to invest in the car sector

There are several ways you can start investing in car stocks. You can buy shares of individual car stocks or invest in an ETF or other fund that invests in a collection of these kinds of stocks.

Here’s how to get rolling:

  1. Choose a stock trading platform. You have plenty to choose from, so be sure to compare your options to find the one that works best for you.
  2. Open your account. Be ready with your ID, Social Insurance Number (SIN) and bank account information.
  3. Fund your account. You’ll need to transfer money to your brokerage account before you can start investing. Some platforms let you start with as little as $1.
  4. Search for stocks. Look up stocks by ticker symbol or use a stock screener to filter the types you’re interested in.
  5. Place an order. Once you’ve found an investment you want, specify how much of it you wish to purchase and submit your order.
  6. Monitor your investments. Track the performance of your portfolio by logging on to your account.

Car stocks

Many car stocks trade on US exchanges. Some of these are headquartered in the US—like Ford, General Motors and Tesla—while others are based in other countries like Ferrari (Italy), Volkswagen (Germany), BMW (Germany) and Honda (Japan).

There aren’t many Canadian-based auto manufacturers. The ones that exist aren’t very well known or cater to specific niches like coaches/buses (Prevost) or luxury sports cars (Felino). If you’re looking to invest in car stocks while supporting the Canadian economy, look for publicly-traded car manufacturers that have assembly plants in Canada such as Ford, Toyota, Honda and Volvo.

  • Tesla, Inc. (NasdaqGS: TSLA)
  • Mazda Motor Corporation (OTC Markets, Pink Sheets: MZDAY)
  • Bayerische Motoren Werke Aktiengesellschaft (OTC Markets, Pink Sheets: BMWYY)(XETRA: BMW.DE)
  • SAIC Motor Corporation Limited (SSE: 600104.SS)
  • Nissan Motor Co., Ltd. (OTC Markets, Pink Sheets: NSANY)(TSE: 7201.T)
  • Hyundai Motor Company (OTC Markets, Pink Sheets: HYMTF)(KSE: 005380.KS)
  • Magna International Inc. (TSX: MG.TO)
  • Martinrea International Inc. (TSX: MRE.TO)
  • Exco Technologies Limited (TSX: XTC.TO)
  • Boyd Group Services Inc. (TSX: BYD.TO)
  • XPeng Inc. (NYSE: XPEV)
  • Ault Global Holdings, Inc. (NYSE American: DPW)
  • Federal Signal Corporation (NYSE: FSS)
  • Oshkosh Corporation (NYSE: OSK)

What ETFs track the automotive category?

These three major automotive ETFs offer different levels of exposure to domestic and international stocks, as well as traditional, hybrid and electric automakers.

  • Evolve Automobile Innovation Index Fund (TSX: CARS.TO)
  • KraneShares Electric Vehicles & Future Mobility ETF (NYSEARCA: KARS)
  • First Trust NASDAQ Global Auto Index Fund (NASDAQGM: CARZ)
  • Global X Autonomous & Electric Vehicles ETF (NASDAQGM: DRIV)

Why invest in car stocks?

Despite inconsistent demand and the negative impact of the global pandemic, analysts have begun to speculate that the global automobile market will recover, according to a report from S&P Global.

The report projects that China will be quickest to regain its momentum, potentially resuming its positive growth trends by the end of 2022. Other countries are also expected to recover but not within the next two years.

Pandemic aside, the industry is also in the middle of a historical transition from vehicles that rely on diesel and gasoline to electric and autonomous vehicles. Electric vehicle sales have been steadily climbing since 2013, averaging a sizable 25% growth rate year over year.

This transition offers an opportunity for investors to back an emerging market trend with significant growth potential.

Risks of investing in cars

An investment in car stocks is potentially lucrative but far from foolproof — considering US vehicle sales have a history of inconsistent demand and the coronavirus pandemic has tipped the industry’s manufacturing on its head.

Auto demand as a result of the COVID-19 pandemic is expected to drop in North America by 3.8 million vehicles, according to Statista. China is set for a 1.8 million drop and Europe is expected to sell 4.2 million fewer vehicles than it did in 2019. All told, global automobile sales are forecasted to fall below 62 million units in 2020 — a significant dip from 2017’s global sales of 80 million vehicles.

While the COVID-19 pandemic won’t last forever, it illustrates that this industry isn’t immune to market-impacting events.

Compare stock trading platforms

To invest in car stocks, you’ll need a brokerage account. Explore your platform options by features and fees to find the account that best meets your needs.

Name Product Available asset types Stock Fee Option Fee Account Fee ETF Transaction Cost Feature Table description
Wealthsimple Trade
Stocks, ETFs
$0
N/A
$0
Free
Get a $50 bonus when you open a Wealthsimple Trade account and deposit and trade at least $100.
Pay no commissions when you trade Canadian stocks and ETFs with Wealthsimple Trade.
Scotia iTRADE
Bonds, Options, Mutual Funds, ETFs, GICs, International Equities
$4.99-$9.99
$9.99 + $1.25 contract ($4.99 + $1.25 contract if completed 150 trades or more a quarter)
$0
$9.99 ($4.99 if completed 150 trades or more a quarter)
Pay no annual account fees.
Buy, sell and trade ETFs, Equities, Options and more with competitive commissions.
CIBC Investor's Edge
Stocks, Bonds, Options, Mutual Funds, ETFs
$4.95 - $6.95
$4.95 - $6.95 (+$1.25 per contract)
$0 if conditions met, otherwise $100/year
$6.95
$4.95 - $6.95 is applicable for online stock, ETF and option trades only. Pay $4.95 when you qualify as an Active Trader (trade 150+ times per quarter).
An intuitive and easy-to-use platform with access to a variety of tools that help you make smart decisions and trade with confidence.
Interactive Brokers
Stocks, Bonds, Options, ETFs, Currencies, Futures
Min. $1.00, Max. 0.5% of trade value
$1.50 min. per order
$0
Min. $1.00, Max. 0.5% of trade value
Extensive trading capabilities and global investment tracking.
Access market data 24 hours a day, six days a week and invest in global stocks, options, futures, currencies, bonds and funds from one single account.
Questrade
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs, International Equities, Precious Metals
$4.95-$9.95
$9.95 + $1 per contract
$0
Free
Get $50 in free trades when you fund your account with a minimum of $1,000.
Opt for self-directed investing and save on fees or get a pre-built portfolio and take some of the guesswork out.
Qtrade Direct Investing
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs
$6.95 - $8.75
$6.95 - $8.75 + $1.25 per contract
$0 if conditions met, otherwise $25/quarter
$0 - $8.75
Trade 100 select ETFs free of charge.
Qtrade Direct Investing offers low trading commissions and an easy-to-use platform with access to powerful tools and a wide selection of investment options. Trade 100 ETFs free of charge and thousands more for $8.75 or lower.
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Bottom line

The COVID-19 pandemic has had a negative impact on car stocks, but forecasts for the coming years are optimistic. And as the electric and hybrid vehicle market continues to grow, so too do stock options for investing in this industry.

Before you purchase car stocks, review your trading platform options to find the account that fits your budget and trading strategy.

Frequently asked questions

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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