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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:
- 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.
- Open your account. Be ready with your ID, Social Insurance Number (SIN) and bank account information.
- 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.
- Search for stocks. Look up stocks by ticker symbol or use a stock screener to filter the types you’re interested in.
- Place an order. Once you’ve found an investment you want, specify how much of it you wish to purchase and submit your order.
- Monitor your investments. Track the performance of your portfolio by logging on to your account.
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.
- Ferrari N.V. (NYSE: RACE)
- Honda Motor Co., Ltd. (NYSE: HMC)
- Toyota Motor Corporation (NYSE: TM)
- AB Volvo (OTC Markets, Pink Sheets: VLVLY)(STO: VOLV-B.ST)
- 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.
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.
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