The soaring popularity of green vehicles is proving to be a major boon for the Zacks Automotive – Foreign industry. Sales of electric vehicles (EVs) are witnessing a massive jump in most countries amid heightening climate concerns. Despite economic worries, vehicle sales in major car markets, including China, Europe and India, are expected to grow year over year in 2023. Commodity inflation and escalating operating expenses remain a concern for the automakers, but the overall prospects of the industry look upbeat. Encouragingly, the valuation of the industry is also supportive, trading at a discount to both S&P 500 and the broader auto sector. Industry participants like BYD Co. (BYDDY – Free Report) , Volkswagen AG (VWAGY – Free Report) and BMW AG (BAMXF – Free Report) are worth betting on.
Industry Overview
Companies in the Zacks Automotive – Foreign industry are involved in designing, manufacturing and selling vehicles, components as well as production systems. The foreign automotive industry is highly dependent on business cycles and economic conditions. China, Japan, Germany and India are some of the key foreign automotive manufacturing countries. The widespread usage of technology is resulting in a fundamental restructuring of the market. Stricter emission and fuel-economy targets and ramp-up of charging infrastructure as well as supportive government policies are boosting sales of green vehicles. With almost all firms intensifying their electrification game, competition is getting tougher with each passing day. Foreign automakers are now actively engaged in the R&D of electric and autonomous vehicles, fuel efficiency along with low-emission technologies.
Key Themes Shaping the Industry’s Fate
EVs Serving as a Major Catalyst: Various cities and nations are pushing toward green energy amid heightening climate concerns. The European Commission is set to phase out new petrol and diesel cars by 2035. China intends to ban fossil fuel cars and sell only new energy vehicles by 2035. Japan will scrap the sale of gasoline-powered cars by the mid-2030s. California will ban the sale of new ICE cars effective 2035 and ensure that 100% of new car and truck sales are electric by 2035 and 2045, respectively. The acceleration of EV targets is offering opportunities to automakers. With consumers’ confidence in EVs rising fast, automakers are prioritizing their resources toward the sale of new energy vehicles, and sales of green vehicles are rocketing. Last year, global sales of EVs jumped roughly 70% year over year to 7.8 million vehicles, accounting for 10% of all new cars sold in 2022. Per S&P Global Mobility forecasts, around 10 million EV units will be sold in 2023, accounting for 14% of the total new vehicle sales.
China Vehicle Market Fending off Challenges: Vehicle sales in China, the world’s largest car market, witnessed the second straight year of growth in 2022. Auto sales managed to maintain momentum last year even in the face of COVID resurgences, commodity inflation, chip crunch and supply chain snarls. According to the China Association of Automobile Manufacturers, a total of 26.86 million vehicles were sold in the country last year, marking a 2.1% increase from the 2021 level. Importantly, sales of EVs almost doubled last year, hitting a record high. Despite the COVID-19 resurgence in the country and economic concerns, Cui Dongshu — Secretary-General of China Passenger Car Association — believes that China could see around 1% in annual growth in its car market in 2023, with fewer sales in the earlier months before they pick up speed toward the end of the year. Sales of new energy vehicles in China are expected to grow 30% year over year.
European Market on the Recovery Track: Per the European Automobile Manufacturers Association (“ACEA”), the European Union passenger vehicle market rose 12.8% last month to 896,967 units, marking the fifth straight month of growth. However, for full-year 2022, new car registrations contracted 4.6% to 9,255,930 units, owing to supply chain snarls and chip concerns, largely in the first half of the year. Encouragingly, ACEA envisions sales of new cars in Europe to recover in 2023 notwithstanding the broader economic uncertainty. Sales are expected to rise roughly 5% year over year to reach 9.8 million…
Read More: 3 Best Buys as Foreign Auto Industry Gets Into High Gear – February 2, 2023
