If you are looking for some solid returns in automotive stocks, investors might want to step away from typical run-of-the-mill car stocks. Most automotive stocks service a wide spectrum of consumers, and most actually fall into the mid-range. Unfortunately, consumer-focused mid-range automotive stocks are not performing above average these days. While these stocks have appreciated in value, they are lagging against companies like Daimler-Benz and BMW.
What do the maker of the Mercedes-Benz and the maker of BMW have in common? Both make vehicles that are in the upper end of the market. These companies produce high-performance luxury vehicles that have always been the pride and envy of the upper middle-class as well as the young and ambitious. Considering the very uneven wealth growth in the United States and everywhere else, these stocks are doing quite well. There is a huge demand for very expensive Mercedes-Benz and BMW cars, especially among traders and those in the finance industry. Thanks to all the cheap stimulus money, there is a huge boom of both income and net worth of people making over $500,000 a year. This is precisely the market upscale BMWs and Mercedes focus on.
Outside of the developed markets in the United States and Europe, the demand for luxury cars in China is strong. BMW sold 456,000 units last year in China alone. Mercedes didn’t do quite as well selling over 282,000 units. Time will tell whether the Chinese market will remain strong due to its recent economic slowdown. What the statistics prove is that when it comes to automotive stocks, the action is in the upper end of the market. Experts suggest that investors looking for solid returns should look past companies such as Ford Motors and General Motors and focus on BMW and Mercedes.
