Comparing Top Three Automotive Players That Will Benefit from the New Turnaround
A significant turnaround is in progress for the auto industry in the coming 2 years, providing large chances to shareholders. First, let us discuss about the main catalysts for the upcoming auto turnaround below.
Catalysts for the Industry Turnaround
- A most recent report suggested that the average age of a vehicle is 11 years, which is increased by around 2 percent compared to last year’s standard. This clearly indicates that in the coming few quarters, there will be considerable demand for the new vehicles.
- The loan market for vehicles and trucks is witnessing some robust undercurrents, regardless of the dismal macroeconomic condition. When interest rates become considerably low, banks get easy access to money at a cheaper cost, and their associate lending constraints for consumers will also somewhat loosen.
- Recently, most banks have permitted consumers with very weak credit scores to obtain automotive loans. In addition, lenders are more prepared to offer long-term loans so as to make the auto loans more affordable, since long-term loans greatly decrease the monthly imbursement amounts.
- For customers, the interest rates for both used and new car loans have been smallest since past four years.
- Promising auto markets are also progressing rapidly and more consumers in those nations are starting to afford cars.
All the above mentioned factors are actually creating a very strong situation for a key turnaround in the present auto sector.
Don’t Go for Auto Manufacturers
From many years, several leading car manufacturing firms are involved in both brand and quality battles against each other, which has deeply influenced their operating margins. As a result, it could be tough and possibly slightly too forceful for investors to select between producers such as Toyota, Honda, General Motors, or Ford Motors, just to name a few.
Best Automotive Parts Firms
Instead of auto makers, take a look at firms operating in the automotive parts business, in which actually there are 3 major players that are expected to greatly profit from the upcoming turnaround including JCI (Johnson Controls), TRW (TRW Automotive Holdings), and MGA (Magna International).
In the coming 2 years, the demand for cars is predicted to increase, although gradually in 2012. A rational method to play such a drift is selecting the automotive parts and equipment firms. JCI, MGA, and TRW have all lived the epic financial crisis in 2009.
Despite the disorder and headwinds, all these firms have maintained their key focus on keeping product lines that are especially competition-prepared for the next year.