3 Foreign Auto Stocks Standing Tall Amid Industry Weakness

Core Insights - The Zacks Automotive – Foreign industry shows a mixed outlook, with strong performance in China, challenges in Europe, and a recovery in Japan [1][3][4][5]. Industry Overview - The foreign automotive industry involves designing, manufacturing, and selling vehicles and components, heavily influenced by economic conditions and business cycles [2]. - Key manufacturing countries include China, Japan, Germany, and India, with a significant shift towards electrification and stricter emission regulations driving market changes [2]. Key Themes Shaping the Industry - China's Auto Market Resilience: In 2024, China produced 31.28 million vehicles and sold 31.44 million, with NEV production and sales reaching 12.89 million and 12.87 million, marking increases of 34.4% and 35.5% respectively [3]. - Europe's Challenges: New car registrations in the EU rose by 0.8% to around 10.6 million units, but BEV and plug-in hybrid sales fell by 6% and 7% due to reduced government subsidies [4]. - Japan's Market Recovery: Japan's new car sales dropped 7.5% to 4.42 million units in 2024, but a recovery is expected with projected sales of 4.6 million units in 2025 [5]. Industry Performance - The Zacks Automotive – Foreign industry ranks 154, placing it in the bottom 38% of around 250 Zacks industries, indicating a negative earnings outlook [6][7]. - Over the past year, the industry has underperformed the S&P 500, losing 23.7% compared to the sector's growth of approximately 23% [9]. Current Valuation - The industry is currently trading at an EV/EBITDA ratio of 8.93X, significantly lower than the S&P 500's 17.67X and the sector's 19.85X [11]. Investment Opportunities - Geely Auto (GELYY): Sold 2.17 million units in the previous year, aiming for 2.71 million in 2024, with a strong global presence and a Zacks Rank 1 [14][16]. - BYD Co Ltd (BYDDY): Achieved record NEV sales of over 4.27 million units in 2024, with a Zacks Rank 2 and projected revenue growth of 21% in 2025 [18][19]. - XPeng Inc. (XPEV): Delivered 190,068 vehicles in 2024, with plans for significant global expansion and a Zacks Rank 2, expecting a 91% improvement in revenue for 2025 [22][24].