There are an estimated 1.4 billion cars on the roads across the world. Over 66 million new cars were sold in 2021 alone. This does not include the sale of used vehicles. Two-wheelers are the preferred mode of transportation in many developing countries, especially in Asia and Africa. There are an estimated 200 million two-wheelers across the world, mostly in Indonesia and India. The ability to commute in private vehicles is one of the key factors leading to the development of metropolitan areas and suburbs. Recreational vehicles and vehicles for use in extreme weather are other categories satisfying the mobility needs of people.
In this note we will look at some of the key players behind the vehicle industry, focusing especially on the private vehicle market.
Cars are an essential transport in much of the world. Barring a few metropolitan areas across the world, public transportation is just not efficient enough to meet the needs of commuters. Cars fill this critical gap. Car manufacturers come in all sizes and shapes, right from mass-market Japanese manufacturers all the way to super-premium Italian companies. Right from the time when Ford commoditized auto manufacturing with its assembly line mode of production, cars became the transport of choice for the masses. This model was replicated with great success in Germany and Japan. Between them, the US, German, and Japanese manufacturers share most of the automobile market. Most large manufacturers make a variety of vehicles catering to a diverse clientele.
The chart below shows the auto sales per company during the fiscal year 2021.
Let’s look at some of the top car manufacturers across the world.
Based in Aichi Japan, Toyota Motors is the largest auto manufacturer in the world by volume. The firm sells mass-market cars, SUVs, pick-up trucks. Toyota also sells luxury vehicles under its Lexus arm. One of the early movers in the hybrid market with its Prius, Toyota is making significant inroads in the use of fuel cells as an alternative to battery-based clean vehicles. The firm sold over 7 million cars during the fiscal year 2021and generated $256 billion in revenues during that year.
General Motors is one of the oldest auto manufacturers in the US. The firm used to be a major player in the mass market of passenger vehicles. However, it has shifted focus more towards pickup trucks, SUVs, and muscle cars recently. GM is also making inroads in the EV market and plans to have 30 EV models by 2025.
Ferrari is based in Italy and is a top manufacturer of performance vehicles. The company is famous for its iconic red cars. It is rated as one of the most powerful global brands. Although it caters to a niche market, the firm is highly profitable. Ferrari produced a little over 9000 cars in 2020 and generated close to $4.0 billion in revenues.
Stellantis was formed by the merger of the US-based Fiat Chrysler and the Europe-based PSA Group in 2021. Stellantis is among the top 6 automakers by volume in the world and produces vehicles under Alfa Romeo, Chrysler, Jeep, Peugeot, and Fiat brands.
Source: Morningstar
The two-wheeler market is a market of extremes. Most of the developing world considers two-wheelers an essential mode of transport, whereas, in much of the developed world, motorcycles are a leisure activity or are associated with gangs. However, scooters are increasingly becoming popular in several European and US cities as a convenient short-haul transport.
Some of the popular two-wheeler manufacturers include
Harley Davidson, based in the US is a top motorcycle manufacturer. The firm makes its iconic cruisers and has a cult following across the world. Harley Davidson also makes motorcycles for various government bodies including the police and state troopers.
Polaris is based in Minnesota, US, and makes motorcycles, all-terrain vehicles, and snowmobiles. The firm’s large engine motorcycles are made under its ‘Indian’ brand and are popular across the world.
Honda is based in Japan and is one of the largest automobile manufacturers in the world. Though the firm produces more passenger cars, it is also one of the largest motorcycle manufacturers in the world. Unlike the niche players we saw above, Honda motorcycles are aimed at the mass market and rely on densely popular Asian and African countries for their sales. Honda also makes a few models catering for the performance and racing market.
Source: Morningstar
Recreational vehicles cover a wide variety of models adapted to different lifestyle choices. These range from camping vehicles, off-road vehicles, snowmobiles, recreational boats, and speed boats. The RV market is estimated to be worth over $60 billion. The covid pandemic has especially been accompanied by an increase in RV sales in the US as traditional holidaying stayed restricted.
Some of the top RV makers include:
Winnebago is an American manufacturer of recreational vehicles based in Minnesota. The firm makes motorhomes across multiple segments and makes light and medium utility vehicles. Winnebago generated $2.4 billion in 2020 revenues.
Thor Industries, based in Indiana, US is one of the top players in the recreational vehicle market. The firm produces mobile homes and other recreational lifestyle vehicles under multiple brands and across price segments.
Brunswick Corp is based in Illinois, US. The firm is a major manufacturer of boats. Brunswick makes boats catering to a variety of customers. The firm also makes and sells boats in Europe under multiple brands. The Covid pandemic saw an increase in demand for boats as an alternate to holidaying. The firm saw an almost 50% increase in profits during the year 2020 and saw sales go up over 30%.
Source: Morningstar
Electrification and the future of passenger vehicles:
The evolution of electric vehicles poses the largest shift seen in the commuter market in over a century. Hastened by environmental awareness and the aesthetics that come with the sophisticated-on board computers, electrical vehicles are slowly creeping up on the market share in the passenger vehicle market. Even the two-wheeler market is flush with e-scooters. While EVs would not replace the over billion cars worldwide, it is fair to expect that in the coming decades, most new cars would be non-combustion engines. EV manufacturers and affiliated service providers are already some of the most popular stocks in the world, with premium valuations. These include Tesla, Nio, Blink, and Nikola.
Investment options:
Buying the individual stocks mentioned above is one way of investing in the auto market. However, ETFs are also available that offer a simpler and diversified way of investing. Most consumer discretionary ETFs have a sizeable allocation to the auto industry. These include Consumer Discretionary Select Sector SPDR Fund (XLY), Vanguard Consumer Discretionary ETF (VCR), and Fidelity MSCI Consumer Discretionary Index ETF (FDIS).
Source: Morningstar
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