2013 turned out to be smooth sailing for the auto industry. This
was confirmed by the recent reading of the U.S. auto sales numbers.
U.S. auto sales in 2013 reported an 8% annual jump to 15.6 million
vehicles, rendering 2013 as the best year since 2007. This
was largely thanks to an improving U.S. economy, upbeat labor
market supported by falling unemployment, a range of new models,
and pent-up demand from buyers and discount offers by automakers.
All the major automakers, excluding
, reported a year-over-year jump in sales.
stole the show, with an 11% rise in sales, while other auto
behemoths, such as
General Motors (
, Honda, Chrysler and Nissan, posted high single-digit sales
Though the yearly sales numbers lifted market sentiment, sales for
the month of December were lackluster and were almost in line with
the year-ago level of 1.36 million.
While GM, Volkswagen and Toyota Motor Corp. witnessed a
year-over-year dip in sales, increased incentives to car dealers
enabled Ford and Honda to report high sales during the last month
The uninspiring December numbers can be partly blamed on strong
auto sales numbers in November, which robbed sales from December.
Promotional offers during Thanksgiving and Black Friday gave a huge
boost to November's sales, which also represented the best month
for auto sales in nearly seven years.
Moreover, Christmas shopping was also one of the key factors which
kept consumers away from car shopping. Automakers also blamed cold
weather as one of the factors for deterring consumers away from
dealers, thus hampering sales (read:
Will the Auto ETF Keep Soaring in 2014?
Is the Trend Expected to Continue?
December wasn't a good end for the auto industry, as sales, based
on a seasonally adjusted rate (SAAR), declined to 15.4 million
units in December 2013 from 16.4 million vehicles in November 2013.
Moreover, a rise in dealer inventories is also a matter of concern.
Also, some economists are worried that growing competition and
higher incentives are likely to eat into the profits of the
automakers (also see
Play Surging Electric Car Demand with the Lithium
However, the December figures should not discourage investors, as
some analysts believe that 2014 would also turn out to be a
promising year for the auto industry.
They expect U.S. auto sales in 2014 to surpass the 16 million unit
threshold. A plethora of forthcoming new model launches is expected
to drive sales higher in 2014. In fact, the performance of new
models was the best during the Christmas month.
The improving industry trend is not just restricted to the domestic
market. Europe as well as emerging markets are also showing signs
of strength, signaling global optimism for this industry.
Both Ford and GM have reported record high sales for 2013 in
China. Moreover, Ford has already announced its intention to
add 5,000 jobs in 2014, marking the biggest recruitment effort in
almost five decades.
If this still sounds unconvincing, then surely the latest
global auto sales numbers should entice investors. For the first
time in history, global auto sales for 2013 have crossed the 80
million vehicles threshold. Consulting firm IHS Automotive recently
reported that global auto sales have jumped 4.2% to 82.84 million
vehicles in 2013.
The world's two largest auto markets - China and the recovering
United States- largely enabled such a stellar performance (read:
China ETFs Tumble to Start 2014
Also, according to the latest data from IHS automotive, global auto
industry sales would rise to 85 million this year and 100 million
Thus an improving economy led by stronger job and housing market is
expected to drive future growth for the auto industry. Moreover,
record low auto loan rates will also support the industry.
How to Play?
While looking at a number of auto stocks is a solid way to play
this trend, investors can obtain a global exposure to this space
First Trust Nasdaq Global Auto Index ETF
The ETF tracks the NASDAQ OMX Global Auto Index, giving investors
exposure to automobile manufacturers across the globe. The product
holds 38 stocks in the basket and is highly concentrated in its top
10 holdings with 60% of assets going to these ten firms. Daimler,
Volkswagen AG (Preference Shares) and Honda Motor Co., Ltd. are the
top three holdings with a combined share of 24%.
Though the fund's top holding - Volkswagen AG - reported a
year-over-year drop in sales, its luxury car brands, Porsche, Audi
and Bentley, have all posted record sales for 2013.
Moreover, Volkswagen has set a goal to become the world's biggest
car maker by 2018. This should clearly work out in favor of CARZ.
In terms of country exposure, Japan takes the top spot at 34.26%
while Germany (24.39%) and the U.S. (19.45%) also have double-digit
exposure in the fund (read:
3 Global ETFs for a Diversified Portfolio in
The ETF has amassed $53 million in its asset base and sees light
volume. The product charges 70 bps in annual fees from investors.
The product returned a solid 35.6% in 2013.
CARZ currently has a Zacks ETF Rank of 2 or 'Buy' with a High risk
outlook, suggesting that the product is expected to outperform the
market in the coming months.
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FT-NDQ GL AUTO (CARZ): ETF Research Reports
FORD MOTOR CO (F): Free Stock Analysis Report
GENERAL MOTORS (GM): Free Stock Analysis Report
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