CHICAGO, June 12, 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 Motors Corp. (NYSE:TM-Free Report), Honda Motor Co. (NYSE:HMC-Free Report) and Nissan Motor Co. (OTC:NSANY-Free Report).
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Industry: Automotive
Link http://www.zacks.com/commentary/27691/
The auto industry is highly concentrated. The top-10 global automakers account for roughly 80% of the worldwide production and nearly 90% of total vehicles sold in the U.S.
In the first five months of 2013, General Motors Company (NYSE:GM-Free Report) led with a 18.0% market share in the U.S., followed by Ford Motor Co. (NYSE:F-Free Report) with a 16.4% market share,Toyota Motors Corp. (NYSE:TM-Free Report) with a 14.2% market share, Chrysler-Fiat with a 11.7% market share, and Honda Motor Co. (NYSE:HMC-Free Report) and Nissan Motor Co. (OTC:NSANY-Free Report) at the last spots with 9.5% and 8.1% market shares, respectively.
Toyota recaptured the sales crown from General Motors by selling 9.75 million vehicles globally in 2012, which exceeded GM's sales of 9.29 million vehicles.
Zacks Industry Rank
Given the industry's unique attributes that distinguish it from other industrial groups, we have a dedicated sector for the industry in our databases. As such, 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 into five industries at the expanded level: 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 #117, Auto-Foreign is #212, Auto/Truck-Original is #108, Auto/Truck-Replacement is #85 and Engines is #212, Retail/Wholesale Auto/Truck is #65 and Retail/Wholesale-Auto Parts is #225. 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.'
What this means is that the outlook for dealers -- both new and second hand -- is positive, while the rest of the auto-related industries lean neutral to negative. 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.
OPPORTUNITIES
To remain competitive, the automakers will need to design vehicles that will cater to consumers in both mature and emerging markets while manufacturing them at low-cost using the most advanced technology.
For example, Ford has undertaken "One Manufacturing" strategy, which aims at producing multiple models from plants across the world in order to save production costs and fast adaptation to changes in consumer tastes. The automaker anticipates producing 4.5 models at each of its plants by 2015, up from 3.6 models currently.
Further, the automakers are concentrating on offering more optional features (which will save money on gas), even on the small and less gas-guzzler vehicles in order to attract buyers. The sale of optional features is helping them offset lower profit margins for small cars relative to large trucks.
The automakers continue to shift their production facilities from high-cost regions such as North America and the European Union to lower-cost regions such as China, India and South America. According to a study by CSM Worldwide, China and South America together will represent more than 50% of growth in global light vehicle production in the auto industry from 2008 to 2015.
The role of governments is highly significant. Their energy and environmental policies will be strongly responsible in molding the auto industry in the coming years. In late 2011, 13 major automakers, including Ford, GM, Chrysler, BMW, Honda, Hyundai, Jaguar/Land Rover, Kia, Mazda, Mitsubishi, Nissan, Toyota and Volvo, have signed letters of commitment with the U.S. Government to upgrade the fuel economy standard of cars and light-duty trucks to 54.5 miles per gallon (mpg) by 2025.
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