Automobiles. Most of us have one. Those of us who don’t still often ride around in them thanks to ride-sharing companies or friends who don’t mind giving a lift. Some people just outright share cares, which in their view is the most economical solution. The automotive industry is one of the largest industries in the world. In the U.S., the automotive industry accounted for about 2.7% of GDP in 2018, or $545.4 billion of the total $20.5 trillion.
There were more than 95 million automobiles produced globally in 2018, which is a decline of just under 2% from 2017’s record 97 million automobiles produced. 2018 marked the first annual decline in automobile production since 2009, albeit in 2009 production saw a 12% decline. China led the way with nearly 28 million automobiles produced, with the U.S. coming in second with more than 11 million automobiles produced. However, there’s a lot more to the automotive industry than just automobile manufacturers.
The Organisation Internationale des Constructeurs d’Automobiles, an international trade association of 39 national automotive industry trade associations, estimates each direct job in the automotive industry supports five jobs in other areas. Inputs used in automobile production include steel, iron, aluminum, plastics, glass, textiles, computer chips, and rubber.
So what are some ways to invest in the automotive industry? Let’s take a look at a few different options.
Of course, the most obvious way to invest is in automobile manufacturers.
If you’re looking to invest in the largest automobile manufacturers, the top five in order of production volume are Toyota, Volkswagen Group, Hyundai, General Motors and Ford. Ford is even the second-most widely held stock on popular stock trading app Robinhood, ahead of Tesla which is the 15th-most widely held stock.
Number of Robinhood Holders as of 2/24
- Ford: 381,000
- Tesla: 152,000
- General Motors: 37,000
- Volkswagen Group: 6,800
- Toyota: 3,700
While all of these companies offer electric vehicles or are developing them, you can invest in purely electric vehicle manufacturers if you don’t want your money supporting their fossil fuel automobiles. Tesla, which has been on a tear and has become the world’s second-most valuable automobile manufacturer, is the most obvious play. If you’re interested in an electric vehicle manufacturer that will go after the world’s largest automobile market, in China, NIO is another purely electric vehicle manufacturer.
Another way to invest in the automotive industry is through the companies that actually sell cars, the retailers. The two-largest automobile retailers in the U.S. are AutoNation and CarMax. Other publicly traded automobile retailers include Sonic Automotive, Group 1 Automotive and Lithia Motors.
If you’re looking to invest in ride-sharing companies, Uber and Lyft are your best options. Both companies went public last year at astronomical valuations and stumbled out of the gate. Shares of Uber are now nearly up 60% off their November low, while shares of Lyft have gained 20% since hitting a low in October.
What About Car Parts?
Investing in the companies that make the parts and the retailers who sell them is another way to have exposure to the automotive industry. Some of the largest components manufacturers include Aptiv, Autoliv, Tenneco, and BorgWarner, with Cooper Tire & Rubber and Goodyear Tire and Rubber being examples of tire manufacturers that are publicly traded. AutoZone, O’Reilly Auto Parts and Advance Auto Parts are examples of auto parts retailers that you can invest in.
Buy a Share In A Classic Car
There’s even a way to invest your dream cars without having to fork over hundreds of thousands of dollars. Rally Rd. is a startup that enables you to purchase shares in classic cars, with previous offerings such as a 1985 Ferrari Testarossa, 1969 Boss 302 Mustang and a 1955 Porsche 356 Speedster.
A Few ETFs To Consider
Lastly, if you don’t want to select individual companies and don’t mind paying the expenses, there’s ETFs that offer exposure to the automotive industry. First Trust Nasdaq Global Auto Index Fund ETF (CARZ) includes only companies classified as car manufacturers with a market capitalization of at least $500 million. iShares Self-Driving EV and Tech ETF (IDRV) includes companies that may benefit from the growth of electric vehicles, including battery technologies and autonomous driving technologies. Another similar ETF is iShares Electric Vehicles and Driving Technology UCITS ETF (ECAR), which includes companies focusing on electric vehicles and technologies.
Despite the rapid innovation in the automotive sector, there are plenty of ways to invest that will give you exposure to the many companies capitalizing on traditional automobiles and the automobiles of the future.