Because the production of new vehicles continues to be impacted by a global semiconductor chip shortage, the demand for auto parts and related services is increasing as people extend the lives of their old cars or buy used cars. As such, we think it is wise to bet on fundamentally sound auto parts companies Bridgestone (BRDCY), LKQ (NASDAQ:LKQ), Gates Industrial (NYSE:GTES), and Standard Motor (SMP). Let’s discuss.The automotive sector suffered a major setback amid the COVID-19 pandemic as the global production of vehicles plunged. In fact, new car production enabled with the latest technologies continues to be impacted by the global semiconductor chip shortage. This has led to an increase in demand for auto parts because consumers are extending the use of their old cars or buying used cars, in lieu of purchasing brand new vehicles.
Most people are still wary of using mass transportation services due to public health concerns. This is driving the demand for personal cars. And because old cars are meeting the demand for private transportation, the auto-parts industry is benefiting. According to Grand View Research, the global automotive aftermarket is expected to reach $529.25 billion by 2028, growing at a 3.8% CAGR of 3.8%.
Consequently, we think it is wise to now buy the shares of auto parts companies Bridgestone Corporation (BRDCY), LKQ Corporation (LKQ), Gates Industrial Corporation plc (GTES), and Standard Motor Products, Inc. (NYSE:SMP). They are well-positioned to take advantage of industry tailwinds based on their solid financials.