Zacks Industry Outlook Highlights: General Motors, Ford Motor, Toyota Motor, Volkswagen and Tesla

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Oct 10, 2013, 09:30 ET

CHICAGO, Oct. 10, 2013 /PRNewswire/ -- Today, Zacks Equity Research discusses the U.S. Automotive, including General Motors Company (NYSE:GM-Free Report), Ford Motor Co. (NYSE:F-Free Report), Toyota Motor Corp. (NYSE:TM-Free Report), Volkswagen AG (OTC:VLKAY-Free Report) and Tesla (Nasdaq:TSLA-Free Report).

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Industry: Automotive

Link: http://www.zacks.com/commentary/29350/

The automobile sector has performed impressively this year, buoyed by economic recovery and escalating demand in the U.S. and Asia. Auto sales soared to a remarkable high, driving the automobile stocks higher.

In the first nine months of 2013, General Motors Company (NYSE:GM-Free Report) was the leading automaker with an 18.0% market share in the U.S., followed by Ford Motor Co. (NYSE:F-Free Report) with a 16.0% market share. Toyota Motor Corp. (NYSE:TM-Free Report) had a 14.4% market share. General Motors regained its top sales position from Toyota, which led the market in 2012 with 9.75 million vehicles sold globally, exceeding General Motors' 9.29 million vehicles. Germany's Volkswagen AG (OTC:VLKAY-Free Report) came third with 9.07 million vehicles sold in the year.

Zacks Industry Rank – Positive Outlook

The distinctive attributes of the auto industry impelled us to have a dedicated sector for the industry in our database. The automobile sector is one of the 16 Zacks sectors, unlike the S&P classification where autos are clubbed into the Consumer Discretionary sector (the S&P has 10 sectors vs. 16 for Zacks).

At the expanded classification level, the Zacks auto sector is divided into five industries: Auto-Domestic, Auto-Foreign, Auto/Truck-Original, Auto/Truck-Replacement and Engines. The level of sensitivity and exposure to different stages of the economic cycle vary for each industry. The sector's retail operations are part of the Zacks Retail sector in two industries -- one for Automobile/Trucks and the other for Auto Parts.

The current Zacks Industry Rank for Auto-Domestic is #48, Auto-Foreign is #15, Auto/Truck-Original is #28, Auto/Truck-Replacement is #37, Engines is #15, Retail/Wholesale Auto/Truck is #30 and Retail/Wholesale-Auto Parts is #77. As a reference point, the outlook for industries with Zacks Industry Rank of #88 and lower is 'Positive,' between #89 and #176 is 'Neutral' and #177 and higher is 'Negative.'

This implies that the general outlook for all auto-related industries is positive. We rank all the 260-plus industries in the 16 Zacks sectors based on the earnings outlook and fundamental strength of the constituent companies in each industry.

Ford plans to triple its line-up in China by introducing 15 models by 2015. In June, Ford opened a new assembly plant in China in collaboration with Jiangling Motors Corp. which doubled its production capacity in the country.

General Motors has also decided to boost the annual production capacity in China to 5 million vehicles and triple its exports from Chinese plants by 2015. In April, the company revealed plans to build four plants in the country to boost capacity. General Motors and its joint venture partners in China plan to invest $11 billion in the country by 2016 and launch about 17 new and upgraded car models as part of their major expansion program.

Last year, General Motors built two plants in China to increase the production capacity by 20%. With the addition of four new plants, the production capacity will increase further by 30% and vehicle exports are expected to rise to 300,000 units from 100,000 units projected for this year.

Even Tesla (Nasdaq:TSLA-Free Report) is seeking a share in the lucrative Chinese market and started the reservation of Model S in the country in August. Although the car is expected to be popular among the wealthy and environmentally conscious consumers in China, high tariffs on imported cars and shortage of charging stations could affect sales.

In 2009, China overtook the U.S. as the biggest auto market in the world by sales volumes when the Beijing government introduced a stimulus package, including tax incentives for small cars. China accounted for a third of light vehicle sales growth in the last five years.

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