Ballooning interest in electric vehicles (EVs) and heightened demand for personal vehicles amounted to great demand for the automobile industry last year. While most EV stocks have become overvalued and many are currently experiencing a sell-off as investors rotate to undervalued cyclical stocks, some car manufacturers are maintaining the momentum they generated last year. For instance, the momentum in Toyota Motor Corporation (NYSE:TM), Volkswagen AG (OTC:VWAGY), and Daimler AG (DE:DAIGn) (DDAIF) is not expected to end anytime soon. So, we think it could be wise to bet on these stocks now.The automobile industry had saw huge demand for personal vehicles last year as consumers sought to take COVID-19 precautions. Also, growing interest in electric vehicles (EVs), with widespread, governmental policy support, contributed significantly to the industry’s performance. While EVs’ long-term prospects look bright, with most countries globally seeking to address climate change concerns over the next decade, the global automotive industry could struggle to grow this year. Global automobile sales are expected to be less than 70 million this year, and the largest producer and seller China is expected to witness a 1.4% decline in sales.
Along with this bleak outlook, investors’ rotation away from overvalued automotive (primarily EV) stocks to quality cyclical stocks is leading to a sell-off. This is evident in the First Trust NASDAQ Global Auto Index Fund’s (CARZ) 0.2% decline over the past three months.
However, Toyota Motor Corporation (TM), Volkswagen (DE:VOWG_p) AG (VWAGY), and Daimler AG (OTC:DDAIF) have been maintaining strong momentum since last year. And we believe these three stocks have the potential to continue doing do in the coming months. Therefore, it could be wise to invest in these stocks now.