When we think of China as an investment play, one common factor comes to mind — demographics. With a population rapidly approaching the 1.4 billion mark, it’s no wonder why President Trump sees it as an economic and political threat. At present standing, China is more populous than four United States put together.
At the same time, we have to be careful about making too many assumptions. Although China is the world’s second-biggest economy, because of its massive size its GDP per capita is only $15,400. To put that into perspective, China is sandwiched between the Dominican Republic and Palau in the global rankings. Thus, the idea of the Asian giant being a free-for-all marketplace is not entirely accurate. However, that won’t dent the enthusiasm for tire stocks.
This is due to the fact that tire stocks are a secular play. If you have a car, you can no more avoid buying tires than you can avoid changing the oil. Yes, we’ve all been guilty of stretching the intended life of our rubber. Logically, I would imagine that such antics are more prevalent in hard times than in good times. But at the end of the day, there will always be a constant stream of demand for tire stocks.
In China, the sector has a captive audience. Up until recently, the country has enjoyed a surge in new car sales. This was helped along by government incentives such as tax cuts on purchases of small-engine models. Those incentives are now gone, which created rumblings that 2017 sales growth may stall. That may be the case, but it won’t matter for tire stocks. They’re required maintenance items, and you can potentially have multiple sales per vehicle.
Here are three tire stocks that are the new play on China.