NIOIF - Crisis And Opportunity In Auto Makers
2025-04-22 11:49:08 ET
Summary
- The auto industry is in distress but not extreme distress; stable companies with low valuations like Toyota, Honda, and Li Auto are likely to outperform.
- Despite recent selloffs, markets remain richly priced; value investing may now have a chance to redeem itself, especially in distressed industries.
- Established automakers face declining margins and sales, while newer EV manufacturers see rising sales but flat or negative profits.
- Among US-listed automakers, Toyota, Honda, and Li Auto offer a balanced mix of stability and EV exposure, justifying a BUY rating.
The Dow Jones US Automobiles Index has lost roughly half of its value in the last five months. This followed a 150% jump between April and December of last year. The index still remains well above pre-pandemic levels (about 300% above them).
Chart A. Since the Covid jump in auto stock prices, they have been extremely volatile. (Stockcharts.com)
