Inventors looking for auto stocks to buy now know it has not been a good year for car and truck manufacturers. The Dow Jones U.S. Auto Manufacturers Index is down nearly 35% year-to-date (YTD). Tesla (NASDAQ:TSLA), once the darling of the auto world, has lost 38% of its value in the past six months alone. A combination of higher interest rates and cooling demand for electric vehicles (EVs) has investors wondering when the industry will return to normal.
But if you read Good Car Bad Car’s latest automotive data, it looks things were pretty good in the first quarter. Overall, sales in the U.S. have grown by 4.5% year-over-year (YOY). However, that’s where the good and bad news diverge, with imports capturing most of the growth.
“We think that any manufacturer offering a strong lineup of PHEV and HEV vehicles, as well as ‘good, cheap, reliable’ EVs is set to reap the rewards of both the economy’s and automotive industry’s continued recovery and growth since 2020’s shutdowns,” Good Car Bad Car stated on April 1.
Based on this assessment, here are three auto stocks to buy for Q2 2024.
Hyundai Motor Company (HYMTF)
If there’s an auto manufacturer that will check all the boxes in 2024, it would have to be the Hyundai Motor Company (OTCMKTS:HYMTF). The company’s North American division reported record-breaking March sales of 76,920 units. That’s up 2% from a year ago. Vehicles leading the way included its electric IONIQ 5, up 58%, the Tucson PHEV (plug-in hybrid electric vehicle) with 62% growth and the Tucson HEV (hybrid electric vehicle), up 48%.
It was Hyundai’s best March ever. “We saw the best Q1 total sales results influenced by Palisade, Kona and IONIQ. We’re thrilled about the all-new Santa Fe, our successful NY Auto Show where IONIQ 5 N won World Performance Car of the Year and the introduction of the refreshed Tucson and Santa Cruz,” stated Randy Parker, CEO of Hyundai Motor America.
If you’re a shareholder, the best part about these record sales results is that the company had an excellent year in 2023, selling 4.22 million vehicles worldwide and generating 15.12 trillion South Korean won (USD $10.9 billion) in operating profits.
Toyota Motor (TM)
Toyota Motor (NYSE:TM) has moved slowly into the EV space, which likely benefitted its financial situation. Instead of focusing on fully electric vehicles, the company has opted to focus on hybrids, starting with the Prius in 1997. Not everyone is excited about its conservative stance.
“The Prius hybrid runs on a pollution-emitting combustion engine found in any gas-powered car…Rather than invest in EVs, though, Toyota is putting corporate profits and the status quo over tackling the climate crisis,” Fortune reported February comments from Katherine Garcia, director of the Sierra Club’s Clean Transportation For All campaign.
As a result of its strategy, Toyota reported nine-month operating income of 4.24 trillion Japanese yen (USD $27.41 billion) through March 31, more than double the previous year, on total global vehicle sales of 7.91 million. Of those, 35.9% were electric of some sort, up 810 basis points year over year.
HEVs and PHEVs accounted for 97% of its electric vehicles sold during this period. That’s likely to be unchanged for the foreseeable future.
Ford (F)
I considered going with a third Asian manufacturer, such as Honda Motor (NYSE:HMC), but opted for one of the “Big Three” with Ford (NYSE:F). Due to weak demand, in January Ford cut its workforce that makes the electric versions of its trendy F-150 trucks. That comes after it said in December that it would cut its 2024 F-150 EV production in half, impacting 1,400 workers at its Rouge Electric Vehicle Center, as the plant moves to one shift only.
Auto manufacturers are businesses, not charities. Profits are essential to their livelihood. Ford’s management merely allocates resources to get the most bang for its buck. If Toyota can do that, why not Ford?
Ford added a third shift at its Michigan assembly plant, which builds Bronco and Ranger trucks, to meet the demand for traditional gas-powered vehicles. Analysts wonder if CEO Jim Farley is trying to play both sides of the fence, missing out on the low-hanging fruit of gas-powered vehicles.
“Though we like CEO Farley’s vision and direction for the future of Ford, we believe it could take a number of years for the benefits of those plans to be realized,” Bloomberg reported comments from UBS analyst Joseph Spak in January.
Farley is doing what he has to in order to keep the profits coming both now and in the future. He’s doing the right things for shareholders to make sure Ford stays one of the auto stocks to buy now.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
