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Investing in car stocks

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

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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 Security number 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

There are plenty of car stocks that trade on US exchanges, both from companies headquartered in the US, like Ford, and from international companies, like Ferrari. Select a company to learn more about what they do and how their stock performs, including market capitalization, the price-to-earnings (P/E) ratio, price/earnings-to-growth (PEG) ratio and dividend yield. While this list includes a selection of the most well-known and popular stocks, it doesn't include every stock available.

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.

  • First Trust NASDAQ Global Auto Index Fund (CARZ)
  • Global X Autonomous & Electric Vehicles ETF (DRIV)
  • KraneShares Electric Vehicles & Future Mobility ETF (KARS)

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 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 Stock trade fee Asset types Option trade fee Annual fee
Sofi Invest
$0
Stocks, ETFs, Cryptocurrency
N/A
0%
A free way to invest in stocks, ETFs and crypto.
Robinhood
$0
Stocks, Options, ETFs, Cryptocurrency
$0
0%
Make unlimited commission-free trades in stocks, funds, and options with Robinhood Financial.
Moomoo
$0 for US stocks
Stocks, Options, ETFs
$0
Trade stocks on the US, Hong Kong, Shanghai and Shenzhen markets.
TD Ameritrade
$0
or $25 broker-assisted
Stocks
$0 + $0.65/contract,
or $25 broker-assisted
TD Ameritrade features $0 commission for online stock, but watch out for high short-term ETF and broker-assisted trading fees.
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Compare up to 4 providers

Disclaimer: The value of any investment can go up or down depending on news, trends and market conditions. We are not investment advisers, so do your own due diligence to understand the risks before you invest.

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.

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