Although uncertainty around global economies continues to haunt investors, the automobile users continue to show some signs of positive sentiments across the world. KPMG, in a recently conducted survey, found the automotive industry executives less optimistic about the economy in the short term, though they remain positive about the industry for the year ahead.
What's affecting the industry?
Intensifying competition among the global auto majors has added up to new pressures as the companies strive to capture the market share by offering competitive prices. Moreover, volatile commodity prices and increasing crude oil prices have significantly added to the cost of manufacturing, affecting profit margins for automobile companies. Ford Motors
As the global automobile industry is going through this most critical time, Toyota Motor
What's keeping the market afloat?
In this highly competitive space, there's no room for error. Changing business models and new technologies are inviting fresh entrants to the industry. So it's important that the existing companies focus on improving manufacturing efficiencies and invest in product development.
To that end, General Motors is planning to sell 1.4 million vehicles in South America in 2015, outlining the solid growth. Ford, on the other hand, is planning to invest $1.1 billion at its Kansas City plant for the production of the Transit commercial van.
Auto manufacturers are also benefiting from emerging markets. Brazil, China, and India saw growth in the automotive market of 14%, 26%, and 12%, respectively, per year from 2004 to 2009. These markets have high demand for light vehicles and are expected to continue growing in the future.
The outstanding players
In my opinion, two emerging automobile stocks outplay others in the industry in terms of a long-term investment strategy.
Silicon Valley start-up Tesla Motors
Foolish bottom line
Though dark clouds hover around the global economy, the automobile industry is among the few industries seeing a bit of sunshine. Investors need to be cautious while stepping into this sector, but aside from the obvious names like Ford, there are a few dark horses that could be primed for success. I'm keeping my eye on both Tata Motors and Tesla Motors as long-term plays.
To keep an eye on the developments in this industry, click below to add any of these names to your watchlist. It's a free, personalized tool that helps you stay informed about your favorite stocks:
Stanley Ross does not hold shares in any of the companies mentioned in the article. The Motley Fool owns shares of Ford Motor. Motley Fool newsletter services have recommended buying shares of Tesla Motors, General Motors, and Ford Motor. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.