With new car prices finally softening after the last five years, 2024 could see increased demand from car buyers. For consumers, the average price of a new vehicle in the United States fell 1.2% this January compared to last year. The prices of used cars are also cooling off, as the average price has dropped 3% from a year ago and 12% from its April 2022 peak.
At a glance, while this trend may seem concerning for investors in the automobile market, it’s actually beneficial. As new vehicles become more accessible and inventories refill, consumers could see the lowering of prices after years of inflation as a sign to buy.
Moreover, many car manufacturers retain sizeable revenue trends from providing replacement parts for cars already on the road. Thus, a resurgent used car market could bolster demand and revenue. As such, here are three auto stocks positioned to benefit from a recovering car market.
Toyota (TM)
With the largest sales and extant fleet of passenger vehicles in the world, Toyota (NYSE:TM) is poised for growth. Not only does the company effectively manage a global network of factories to keep the lowest costs possible, but it also consistently focuses on innovating with each new vehicle generation.
By pouring resources into hybrid engine technology, Toyota sweetens the deal for new car buyers with significant leads in fuel efficiency and engine longevity. This approach has made Toyota a champion, as its reputation makes it one of the most attractive automakers on the market.
For investors, Toyota’s financial performance in the last year has been especially impressive. With Q4 2023 revenue reaching 12.04T JPY and quarterly profit margins up by 51.21%, Toyota’s sales growth cannot be ignored. Thus, investors looking for steady auto stocks to invest in cannot go wrong with TM.
Stellantis (STLA)
As the pre-eminent global automobile conglomerate, Stellantis (NYSE:STLA) shares seem undervalued compared to the market trends. Though relatively young, STLA is a powerful merger of two longtime giants: Fiat Chrysler Automobiles and the PSA Group. For 2023, the company ranked as the world’s fourth-largest automaker by sales volume.
By covering markets across several continents, Stellantis leverages economies of scale to influence the industry and keep prices competitive across its brands. Moreover, by owning an astounding 14 brands from Chrysler and Jeep to Alfa Romeo and Maserati, the company has a wealth of technological and design references for future cars.
However, it’s not just flashy brand diversity that makes Stellantis a lucrative play, it’s the growing electric portfolio. Nearly one-third of its car portfolio was electric by the end of 2023, and in 2024 the company intends to release another 18 all-electric models. Pair this with STLA’s global market reach, and the buy rating becomes well-earned.
Mercedes-Benz (MBGYY)
The German luxury giant, Mercedes-Benz (OTCMKTS:MBGYY) has taken an innovative approach to growth, leading to its stability in the industry. Its name conjures images of sleek sedans and opulent SUVs, but Mercedes dominates in another very unexpected product category among automakers: vans. And more specifically, the push for fully electric vans.
In 2023 alone, Mercedes-Benz sold over 23,000 fully electric eSprinter vans, marking a 51% increase in sales over 2022. These vans, applicable to several industries from delivery to transport, are the future of supply operations for several European companies. Moreover, the electric vehicle niche fits vans well due to its application for urban delivery and overnight storage in depots.
The expertise and sales strategy Mercedes-Benz is developing around its electric vans will eventually become central to the company’s future. That’s because, by 2030, Mercedes-Benz intends to offer an all-electric version of every vehicle in its portfolio. Quite an impressive goal among auto stocks.
On the date of publication, Viktor Zarev did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
