Industrials

U.S. Autos and Mobility

By: Itay Michaeli

Apr. 03, 2025 - 2 minutes 30 seconds

Looking down a row of autos being manufactured in a factory.

Overview:

Our proprietary data helps isolate outperformers in the auto sector even among historical lows.
Long-term upside potential exists for this complex industry as seen in our "Starting Five" preferences.
Supplier stocks may be close to bottoming, but we're selective in where we expect to see revenue and margin growth.
Survey results offer county-level tracking and modeling of key automotive segments.

Navigating auto stocks requires disciplined fundamental positioning and multiple paths for outperformance. We deploy proprietary survey and county-level data to identify opportunities. Automaker stocks are complex but offer the greatest long-term upside potential, in our view, on occasionally large perception or reality gaps. We believe supplier stocks are close to bottoming.

Five Preferences to Drive Long-Term Growth of U.S. Auto Industry

The U.S. auto stock sentiment feels as depressed as ever with most trading at or near historical multiple lows. Yet the sector has a long history of groupthink and over-extrapolations that led to alpha opportunities, making it ripe for stock picking. The key is to identify optimal exposures (exposures matter) and multiple paths to outperform. Automaker stocks are volatile and complex but are often where the most long-term upside potential exists. For example, we believe autonomous vehicle/artificial intelligence (AV/AI) could nearly triple the available automaker profit pool.

We selectively craft exposures to our "Starting Five" preferences:

Defensive Franchises (North American Pickup Trucks),
U.S. Auto Demand Resilience,
AV/AI Value Unlock,
A Path to Outperform in electric vehicles (EVs), and
Self-Help/Turnarounds.

We believe supplier stocks are close to bottoming on lessening revenue mix pressures and bottoming auto production in the second half of the year (H2). We are still selective, however, preferring names that best fit our exposures and where we are most confident about revenue acceleration and margin expansion.

What Is Proprietary?

Our vehicle density survey, which gives us an edge on the most important, yet overlooked, U.S. auto demand driver,
County-level Electric Vehicle accretion/cannibalization tracker,
County-level Autonomous Vehicle (AV) model
Bottom-up U.S. EV adoption model and county-level adoption curve modeling.

Financial and Industry Model Implications

We expect U.S. auto sales to recover to US$16.5 million this year (pricing -2%) and US$17.1 million next year, keeping U.S. dealer inventory at a reasonable supply.

Automotive SWOT


Strengths Greater macro resilience than many expected Pent-up demand in the U.S. and Europe Production discipline and proactive restructuring Supplier margins improving Automakers gaining traction with high margin services	Weaknesses Tech development challenges, including software-defined-car Speed of product development too slow
Opportunities Improving competitive fitness Leveraging AV/AI to 3x the available profit pool Leaning into NEVs in the U.S.	Threats Tariffs / geopolitics Rapid global expansion of Chinese automakers Slow EV demand in the face of regulatory burdens Macro headwinds

Subscribing clients can read the full report, Initiating Coverage Of US Autos & Mobility - Ahead Of The Curve Series, on the TD One Portal

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