Automotive stocks can be challenging to navigate for investors. The car industry is notoriously cyclical and capital intensive, heavily unionized and quite competitive. Car sales are often used to gauge how the economy is doing and consumers’ purchasing power. Carmakers constantly need to invest in new models to stay ahead of competitors and on the latest technologies, especially as the world adopts electric vehicles (EVs).
As interest rates are staying higher for longer, making it harder for people to finance new cars, automotive stocks have underperformed. Over the past year, the sector is up only 6%, compared to the S&P 500 index’s 26% gain, and so far this year, the disparity is higher, with car stocks down more than 23% and the US benchmark rising almost 10%.
Apart from interest rates being stuck highest in more than two decades, an economic slowdown in China, the largest car market, sluggish EV demand and high material costs add to the headwinds for the automotive sector.
However, there are automotive stocks that continue to thrive in these challenging conditions and the sector is likely to rebound once interest rates begin to fall. In this guide, we looked at 10 of the best auto stocks in the market. See our picks below:
Let’s begin with a quick overview of the top auto stocks that may be worth adding to your investment portfolio:Best Auto Stocks to Buy in November 2024
A Closer Look at the Top Automotive Stocks to Invest in
Let’s take a deep dive into the top auto industry stocks to buy now and see the investment case behind them:
1. Toyota – Caution, Despite a Record-Setting Year
The Japanese auto giant Toyota Motor Corp. cemented its position as the world’s biggest carmaker with 11.2 million passenger cars and commercial vehicles sold in 2023. It’s also the second most valuable carmaker behind Tesla with a market cap of $295 billion. Its strength in hybrid vehicles continues to pay off, as many buyers are shying away from all-electric vehicles. In fiscal 2024 ended March 31, it set a record with net income of JPY4.94 trillion ($44.9 billion), a 102% gain year over year, and record revenue of JPY45.1 trillion, rising 21.4% from fiscal 2023.
Even so, Toyota Motor predicted that net income would fall 27.8% this financial year to JPY 3.57 trillion. It also said that total revenue will only rise 2% to JPY 46 trillion.
The reason for the tepid guidance is Toyota is expecting rising costs from upgrades and “human costs,” which include rising labor expenses. In the meantime, the company has a solid dividend, which equates to a yearly payout of $2 a share, or 1.98% in yield.
Ticker?
P/E?
Dividend Yield
NYSE: TM
9.65
1.98%
2. Nissan – Impressive Lineup of Electric Sport Utility Vehicles
The Japanese automaker is overcoming slower sales in China with stronger sales in every other market. It leads the EV market in Japan and is working on plans for next-generation solid state batteries that will make it easier and less expensive to mass produce EVs.
The company, which was ahead of the game when it introduced the Leaf electric sport utility vehicle (SUV) in 2011, still has a strong EV lineup of sports utility vehicles besides the Leaf, with the Ariya SUV, the Infiniti QX80 and two new SUVs, Armada and Murano.
Nissan posted strong numbers for fiscal 2023, with revenue of JPY 12.6 trillion ($81.5 billion) up 19.7%, and a 92% rise in net income to JPY 426.6 billion. In fiscal 2024, Nissan expects revenue to rise 7.9% to JPY 13.6 trillion, but net income to drop by 11% to JPY 380 billion, due to development costs that include support for its suppliers. Nissan said it expects to raise its annual dividend to JPY 25 this year, a 25% increase. Considering its expected growth, the stock appears to be a steal at less than six times earnings.
Ticker?
P/E?
Dividend Yield
OTC: NSANY
5.40
2.56%
3. General Motors – Underpriced Considering Potential Growth
The US automaker has fallen out of favor with many investors, but it sees strong sales from its large SUVs as well as its less-expensive smaller vehicles. It’s investing in EVs, but with somewhat of a wait-and-see attitude. At present, it’s trading for around 5.5 times earnings, making it a steal considering its cash reserves and yearly EPS forecast.
In the first quarter of 2024, General Motors had revenue of $43 billion, up 8%, year over year and earnings per share (EPS) of $2.56, up 51.5% over the same period last year. GM is forecasting full-year EPS of between $8.94 and $9.94, up from earlier forecasts of between $8.50 and $9.50. The new projection represents a rise of 22.9% at the midpoint over 2023.
CEO Mary Barra said she expects the company’s EV vehicles to be profitable by the second half of the year, due to an expected recovery in EV demand, production growth and lower commodity prices. The company is also quietly making inroads into battery technology with the addition of its second battery cell plant, and with a third scheduled to be ready later this year.
Ticker?
P/E?
Dividend Yield
NYSE: GM
5.55
1.06%
4. Honda – Strong US Sales and a Bigger Push into Electric Vehicles
After lagging behind competitors in the EV market, the Japanese car and motorcycle company has recently announced it would spend $11 billion to build four EV plants in Canada, enough to produce 240,000 cars a year for the Canadian and US markets. Honda Motor has ambitious plans in the EV market. EVs and fuel-cell electric vehicles will represent all of its vehicle sales by 2040, it said. Its first electric SUV, the Prologue, went on sale this year.
In the first nine months of its fiscal year, the Honda Motor saw revenue of JPY 14.999 trillion ($96.9 billion), rising 19% year over year, driven by strong sales in the US. Its operating profit was JPY 1.076 trillion, up 47% over the same period last year. It said it expects fiscal 2024 revenue to rise 19.5% to JPY 20.2 trillion, and for operating profit to increase about 60% to roughly JPY 1.25 trillion.
The carmaker has a twice-yearly dividend and it paid out $1.02 a share in 2023. It has a payout ratio of only 27%, so there’s room for continued dividend growth. The company is forecasting a yearly dividend total of $1.12, increasing 9%.
Ticker?
P/E?
Dividend Yield
NYSE: HMC
9.25
3.01%
5. Ferrari – Double-Digit Growth, Strong Brand Appeal
The Italian sports car maker typically has higher gross margins than other automakers. Its main markets continue to be Europe and US, but Ferrari has seen increased sales elsewhere, particularly in China, and the Asia Pacific (APAC) region. It also has a thriving Ferrari luxury brand, selling items, such as clothing.
In the first quarter, Ferrari reported revenue of €1.59 billion ($1.71 billion), up 10.9% year over year, and after-tax profit of $352 million, up 19% over the same period last year. Despite that, the stock fell immediately following the earnings report because total shipments were flat year over year, the company didn’t raise guidance, and sales in China fell 20% from the same period in the prior year. However, its margins remain strong as it focuses on value over volume.
If you take a longer view, the company has seen double-digit revenue and earnings growth, and it still expects revenue of €6.50 billion in 2024 and €6.98 billion in 2025. Ferrari’s growing brand sales also help the company adjust more easily to the typical cyclical sales that affect most automakers.?Its brand value also makes it one of the best car stocks to buy.
Ticker?
P/E?
Dividend Yield
NYSE: RACE
52.02
0.64%
6. Gentex – Riding the Automotive Industry Gadget Trend
Gentex’s products are benefiting from rising demand for technological gadgets in cars and aircraft. The company has come out with a number of new products, such as its dimmable glass and its biometric authentication, which uses a driver’s iris scan to start a car and adjust mirrors and seats, personalizing each driver’s preferences.
The economic slowdown in China has affected many auto stocks, but Gentex is coming off a record quarter, with sales of $590.2 million, which rose 7% year over year, and EPS of $0.47, which was up 12% compared to the first quarter of 2023. Gentex also improved gross profit margin by 260 basis points year over year, to 34.3%.
Two more things stand out about Gentex. Its strong fundamentals, as it carries little debt, with a debt-to-EBITDA ratio of only 0.009, and it has consistently done stock buybacks. In the quarter, it repurchased 1.2 million shares of stock and its current repurchase plan calls for the buyback of an additional 14.7 shares.
Ticker?
P/E?
Dividend Yield
NASDAQ: GNTX
18.50
1.38%
7. American Axle & Manufacturing – Benefiting from EV Growth
American Axle, a small stock with a market cap of just $913 million, is adapting well to the rising production of EVs. It partnered with Shenzhen Inovance Technology to provide XPeng (NYSE: XPEV) with 3-in-1 electrical drive units, with production starting later this year. It also has several contracts for luxury Original Equipment Manufacturer (OEM) components with EV makers.
American Axle saw sales of $1.61 billion in the first quarter, up 8% year over year, while net income was $20.5 million, or $0.17 in EPS compared with a loss of $5.1 million or loss per share of $0.04 in the same period a year ago. The company benefited from higher demand for its products, given steadier production by its customers.
This year, the company is forecasting full-year revenue of between $6.05 billion and $6.35 billion, a rise of 1.9% at the midpoint over 2023 and adjusted EBITDA of between $685 million and $750 million, up 3.4% at the midpoint.?
Ticker?
P/E?
Dividend Yield
NYSE: AXL
N/A
N/A
8. AutoZone – Rock Steady Growth in Auto Parts
AutoZone opened 26 net new stores in the second quarter of fiscal 2024, bringing its total to 7,191 stores, including 6,332 in the US, 751 stores in Brazil and 108 in Mexico. The company sells automobile parts and supplies to drivers, and also has the ALLDATA service, which sells and maintains diagnostic software used by automotive repair shops. Over the past decade, it has grown annual net income by an average of 10% each year.
In the first six months of fiscal 2024, AutoZone’s sales rose 4.9% from the same period a year earlier to $8.05 billion as it benefits from the DIY trend as people opt to repair rather than replace their cars amid stubbornly high interest rates. The company also saw six-month EPS rise by 18% to $61.48. Much of the growth is coming from international operations, with its international same-stores sales up 10.6%, at constant currency, compared to a 0.3% rise for its domestic same-store sales.
The automotive parts retailer doesn’t pay a dividend, but it spent $223.8 million in its share repurchase program in its most recent quarter, with an additional $2.1 billion authorized by its board. That comes after spending $3.6 billion on share buybacks in fiscal 2023.?
Ticker?
P/E?
Dividend Yield
NYSE: AZO
20.97
N/A
9. Stellantis – Possible Pause Before a Rebound
Stellantis, which was formed in 2021 merger of Fiat Chrysler and PSA Group, has ambitious plans for 2024, most prominently the launch of 25 new models this year, including 18 battery-electric vehicles. It’s ahead of most automakers in that it actually makes profit from its EVs.
It saw revenue of €41.7 billion ($44.8 billion) in the first quarter, which was down 12% year over year, due to lower sales and the effect of foreign exchange rates. The company purposely reduced inventory in a move that should help the pricing of its models going forward.
One benefit of the lower numbers is they have made the stock more affordable, with it trading at less than four times earnings, a price-to-earnings ratio (P/E ratio) of 3.40. It also drove up its dividend yield to above 7%. Lastly, the company plans to buy back €3 billion of its shares this year, and it also raised its dividend by 16% to €1.55 per year.
Stellantis offers solid shareholder returns. It raised its dividend by 33% this year to $0.12 and has an outstanding 7.59% dividend yield.? It also began a $10 billion share repurchase program last fall. With strong fundamentals, the stock may be poised for a turnaround.
Ticker?
P/E?
Dividend Yield
NYSE: STLA
3.40
7.59%
10. Nio – Becoming a Threat in EV Mass Market Category
The company, known for its luxury EV brands in China, is making a big plunge into the EV mass market, directly challenging Tesla’s Y EV. First, the company’s L6, priced at around $34,600, had 41,000 deliveries between April 18 and May 5, and now the company is hinting its new Onvo L60 model will compete with Tesla’s Y as well.
In April, Nio saw a 134.6% uptick in deliveries year over year, to 15,620 vehicles and in 2024, deliveries have increased 21.2% over the same period last year, to 45,673 vehicles. In 2023, it saw revenue rise by 12.9% to CNY 55,617.9 ($7.83 billion), but its losses widened even more, by 43.5% to CNY 20,719.8 million.
If the company can maintain its margins while breaking more into the EV mass market, its long-term prospects are good, considering the growth of China’s middle class and its ability to price its cars below competitors outside China.
Ticker?
P/E?
Dividend Yield
NYSE: NIO
N/A
N/A
What Are the Main Types of Auto Stocks?
The auto industry is crucial to the world economy and there are a lot of different types of auto stocks to buy that service the car industry beside pure-play automakers.
Automakers: These are the companies that design, manufacture, and sell cars, trucks, SUVs, and other vehicles. Some well-known examples of major players include Stellantis, Tesla (NASDAQ: TSLA), General Motors, Ford Motor Company (NYSE: F), Toyota, and Nissan.
Auto parts suppliers: They manufacture the parts that go into automobiles, such as engines, transmissions, seats, tires, and batteries. Examples of auto parts suppliers include American Axle & Manufacturing, BorgWarner (NYSE: BWA), and Magna International (NYSE: MGA).
Auto dealer groups: These companies operate dealerships that sell new and used cars. Examples of auto dealer groups include AutoNation (NYSE: AN), Penske Automotive Group (NYSE: PAG), and Lithia Motors (NYSE: LAD).
Auto parts retailers: They sell auto parts and accessories to individual customers and businesses. Examples of auto parts retailers include AutoZone, Advance Auto Parts (NYSE: AAP), O’Reilly Automotive (NASDAQ: ORLY), and Genuine Parts (NYSE: GPC).
Electric vehicle (EV) manufacturers: These companies specialize in the production of electric vehicles. Examples include Tesla, which is the world’s most valuable auto maker with a market cap of $566 billion U.S. dollars, Nio, Rivian (NASDAQ: RIVN), and Lucid Motors (NASDAQ: LCID).
Self-driving car companies: They are developing technology for autonomous vehicles. Examples include Waymo (a subsidiary of Alphabet (NASDAQ: GOOGL), Cruise (a subsidiary of General Motors, and Aurora Innovation (NASDAQ: AUR).
Exchange-traded funds (ETFs) allow you to invest in the automotive industry without having to pick just one or two stocks, offering a diverse exposure to the sector. Some of the best-known automotive ETFs: Fidelity Electric Vehicles and Future Transportation ETF (NYSE: FDRV): It specializes in stocks involved in the electric vehicle (EV) industry and future transportation technologies, including battery manufacturers, charging station operators, and autonomous vehicle developers. It tracks the performance of the Fidelity Electric Vehicles and Future Transportation Index. Simplify Volt RoboCar Disruption and Tech ETF (NYSE: VCAR): This actively managed ETF focuses on companies involved in the development of autonomous vehicles and related technologies. More than 80% of its holdings are large-cap tech stocks. First Trust NASDAQ Global Auto Index Fund (NASDAQ: CARZ: One of the first automotive ETFs, it tracks the S-Network Electric & Future Vehicle Ecosystem Index. The Fund invests in Future Vehicles & Technology companies, including tech companies such as Nvidia as well as Toyota and Tesla. SmartETFs Smart Transportation & Technology ETF (NYSE: MOTO): It is actively managed and invests in a variety of stocks connected with EVs and autonomous vehicles, including trends such as transportation as a service, autonomous or electric public transportation and companies with related technologies to autonomous or EVs.What Are the Best-Known Auto Sector ETFs?
Where to Get Automotive Stock Tips and Insights
A good source of automotive stock information is AltIndex, a subscription-based service that uses alternative data and artificial intelligence (AI) to rate stocks. AltIndex updates its data throughout the day.
Begin with the company’s ranking of best automotive stocks, which rates companies using AI score, updated every half an hour with real-time share prices. The AI score relies on several datasets, to show which stocks are likely to be active. Stocks are scored from 1 to 100, simplifying the selection for investors. AltIndex relies on web searches, customer satisfaction ratings, social media, and app downloads, to help it analyze a company.
AltIndex has more than 10,000 members and provides more than 100,000 stock insights and alerts each day, and has a strong win rate of 75% from its AI stock picks.
You can try AltIndex’s Starter Plan for just $29 a month and receive stock picks directly to your email, as well as many other useful features.
Conclusion
The global auto industry is in a period of transition, with some companies adapting better than others. Traditional automakers like Nissan, Honda are investing heavily in electric vehicles (EVs) to compete with Tesla and other pure-play EV companies such as Nio. Meanwhile, parts and technology suppliers such as American Axle & Manufacturing and Gentex are benefiting from the increased production of EVs, and the growing use of technology in vehicles.
Some companies, including Toyota Motors and Ford Motor Company are cautious about EVs and are focusing on hybrid vehicles instead. This strategy may pay off in the short term, but it could put them at a disadvantage in the long term.
Overall, the future of the auto industry is electric. Companies that are able to innovate and adapt will be the ones that succeed.
References
https://global.toyota/pages/global_toyota/ir/financial-results/2024_4q_presentation_en.pdf
https://about.autozone.com/static-files/3a3243c6-af93-4aaa-b618-b4ac5002ceed
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Jim Halley
EditorI am an experienced journalist who has also worked as an editor and writer at the Savannah Morning News, Salt Lake Tribune, USA Today, Stars and Stripes, and The Motley Fool. I spent the first half of my career in sports journalism, but in recent years have switched to writing about my other passion, stocks, particularly healthcare, real estate and consumer staples stocks. I've won numerous journalism awards from the Associated Press and state press associations and have been a judge for the Georgia Sportswriters Association. I've written one non-fiction book, Just One More Time, about Georgia Southern football, and…
