It seems that Tesla (TSLA) has sucked all the air out of the automotive sector, leaving no room for interest in other auto stocks. In a time of ultra-low interest rates and growing sales for cars, trucks and motorcycles, no one can seem to get past a niche electric-vehicle (EV) maker that sold just 500,000 cars last year. General Motors (GM) did that in the second quarter, with sales down 34% due to the lockdown.
The point is, there are bigger opportunities — and dangers — out there than just one cool company with a brilliant CEO.
The big companies may not be sexy, but they build the vehicles that everyone drives and will drive for many years to come. Remember, there’s little national infrastructure for huge amounts of electric vehicles. And new breakthroughs in hydrogen are changing the possibilities for alternative power sources.
Uprooting a century-old industry that defines individual mobility isn’t as easy as it seems.
These seven auto stocks to watch into 2021 are a mixed bag of blue-chip names and hot niche players:
- Nio (NASDAQ:NIO)
- Ferrari (NYSE:RACE)
- General Motors (NYSE:GM)
- Toyota Motor Corp (NYSE:TM)
- Harley-Davidson (NYSE:HOG)
- Tata Motors (NYSE:TTM)
- Ford Motor Co (NYSE:F)
Auto Stocks to Watch: Nio (NIO)
During the first week of January this year, this Chinese EV maker was trading around $3.50 a share. Today it’s trading around $45.
Why? Because it’s “China’s Tesla.” Like Tesla, it started with a high-performance model that it could sell to high-net-worth individuals that were early adopters and could afford a collectible.
Now, its product line is expanding to more types of vehicles for the broader market — sedans, SUVs and compacts.
What makes NIO unique is its Battery as a Service (BaaS). Simply put, it has designed a subscription battery service that comes with the charging equipment and battery pack. The battery pack is swapped in and out easily, so you can have an extra charged pack at the ready if you need one quickly. Also, the plan automatically upgrades your batteries when improved batteries come out. And all packs are universal, so you can swap between cars.
It’s an interesting model. But remember there are 400 EV makers in China, and that doesn’t include U.S. and European carmakers.
Yet we know that in the Digital Age, the first to the front can have a significant advantage over the competition, even if some of that competition is superior.
NIO still looks strong, even after its quadruple-digit return this year. It currently has an “A” rating in Portfolio Grader.
How does a company that produces a limited number of vehicles a year that are certainly not environmentally focused end up on the buy list of vehicle makers?
Because RACE sells a lifestyle as well as cars. It has a significant line of clothes and accessories to go along with its ultraluxury cars. That helps keep cash rolling in, especially on the Formula One circuit where fans buy gear like they do for their favorite football team.
But it’s the cars that make the money. And RACE reported in early November that sales were up again, after lagging in Q2. The company does about $1 billion in annual sales, but it has a $53 billion market capitalization, which gives you an idea of how powerful the brand is.
The other unique aspect of this company is that fact that its client base isn’t usually hurt by economic vagaries. These high-net-worth individuals aren’t usually financing these cars.
RACE stock is up 25% in the past year and things are looking even better for 2021. It currently has a “B” rating in Portfolio Grader.
General Motors (GM)
On the other end of the spectrum from RACE is GM. This cornerstone of the old Big Three is all about variety and volume.
GM sold almost 2.9 vehicles in 2019. And nearly 70% of all the vehicles it sells at this point are SUVs and trucks. If you look at the sticker prices for those types of vehicles, that’s where there are significant margins as well.
Nowadays, a well-appointed truck will run you as much as or more than a luxury sedan. What’s also driving vehicle sales, which are rising, is low interest rates and longer terms.
Boats were traditionally financed almost like houses, with 10-year loans or more. It’s getting to the point where the same thing is happening with vehicles. And that works well for GM.
Also, the real money in selling vehicles isn’t the sale, it’s in the servicing. And the more vehicles sold, the more servicing gets put on the books.
GM is up nearly 25% in the past year and 51% in the past three months. All the trends are GM’s friends at this point. This stock currently has a “B” rating in Portfolio Grader.
Toyota Motors Corp (TM)
Having crashed the Big Three party — and eclipsed most of them — many years ago, TM is another blue-chip carmaker with a significant global footprint.
However, TM stock isn’t getting the love that other global vehicle makers are getting. Some of that has to do with the pandemic in Asia and its loss of the U.S. and Chinese markets for a while.
Other challenges include the sheer volume of competitors it has across all markets. And if it becomes the premium maker of low-maintenance vehicles, it’s hard to see where it makes the service revenue.
TM certainly has been active with EVs, and its trucks are legendary from the Sahara to Afghanistan’s mountains to farms in Iowa. But there are few car cultures like in the U.S. where Toyota made its mark decades ago.
The stock is down 1.4% in the past year, but it has maintained its dividend unlike its U.S. peers. It now sits at a decent 3.1% yield. You don’t have to sell it today, but there’s no real reason to buy it here, either.
TM currently has a “D” rating in Portfolio Grader.
In late 2006, HOG was trading at all-time highs around $70. By early 2009, it was trading at $11. A lot of people were talking about the demise of this iconic American motorcycle maker. But when you’ve been around since 1903, resilience is no longer something to look for, it’s genetically ingrained.
HOG stock got near those highs again about six years ago, but it has had trouble defining its place in the vehicle market. The folks that used to buy Harleys for recreation are now buying trucks. And younger generations aren’t as taken by the massive bikes and are looking for eco-friendly alternatives.
Harley-Davidson is showing that it understands these trends, and the company is now making new lines of electric motorcycles and sport bikes for urban and suburban commuters. It has a cult following for its classics in countries around the world, but in the U.S., it’s also looking for ways to keep its long-time fan based engaged as they age, as well as bring in a whole new generation.
The stock is up 11% in the past year and 40% in the past three months. That strong run should continue into 2021. For that reason, HOG currently has a “B” rating in Portfolio Grader.
Tata Motors (TTM)
This automaker has been around since 1945, so why haven’t you heard of it? Because it’s an India-based carmaker that has dominated that market and others in Asia for decades.
But it wasn’t until relatively recently that it looked to expand its empire. Instead of building out dealerships and parts distribution channels, it went the efficient route. It bought existing brands with those footprints already in place.
TTM owns both Jaguar and Land Rover. It also has joint ventures with established brands in countries across Asia, including Indonesia.
Another aspect of the business has always been TTM’s close relationship with the Indian armed forces. It is one of key contractors for the military’s vehicles because India has always chosen to remain as self-sufficient as possible when it came to buying military hardware.
It has done a very good job of improving the quality and reputation of its high-end global brands while also remaining a strong regional player. But its global footprint isn’t that big, and its regional markets generally opt for smaller cars in high-density populations.
The stock is up nearly 15% in the past year, and it’s an under-the-radar choice. It should get stronger as the global economy recovers but it’s not a rush out and buy, either. It currently has a “C” rating in Portfolio Grader.
Ford Motor Co (F)
In Q2 of this year, Ford trucks outsold Toyota trucks by 127,000 units — in a bad quarter. Its F-150 remains the leading pick-up truck in the U.S., with GM in a close second.
The crazy thing is, Telsa’s market cap is about 15 times higher than Ford’s market cap at this point. Yet TSLA’s entire sales are barely half of Ford’s truck lines. That doesn’t even include Lincoln brands or any of its other vehicles.
But TSLA isn’t about sales as much as it is momentum. It’s seen as a brand for the future whereas Ford is seen in the rearview mirror. It isn’t sexy. And it has a big challenge in turning a legacy company into a nimble EV competitor.
Ford has a lot more going for it in the EV sector. And its new Bronco coming to market should prove decent competition for TSLA and others. But it’s all in the execution.
The stock is up 5% in the past year and is closer to a buy here than a sell, but don’t be in a hurry. Currently, Ford has a “C” rating in Portfolio Grader.
On the date of publication, Louis Navellier has no long positions in any stocks in this article. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.