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With Toyota Gone, California's Loss Is Our Gain

Companies / US Auto's Jun 06, 2014 - 03:14 PM GMT

By: Money_Morning

Companies

Michael A. Robinson writes: It's almost impossible to overstate the significance California has played in making Toyota Motor Corp. (ADR) (NYSE: TM) a U.S. success.

The Japanese firm set up its headquarters in Hollywood back in 1957. It used its surging popularity in this car-crazy, trendsetting state to become not just a major American nameplate but a dominant global brand.


No wonder California leaders were so shocked when they recently learned that Toyota is pulling up stakes in the Golden State. Toyota now plans to build a new North American headquarters in Plano, Texas, taking 3,000 jobs with it.

This surprise decision sparked an intense political debate here in California in which critics accuse the state's leaders of pursuing a political agenda that is clearly anti-business.

That may very well be true, but behind the scenes there is a much larger dynamic taking place - the rise of a truly global marketplace.

And it's giving us a beautiful, long-term, market-crushing opportunity...

Amidst Boom Times, Production and Profits Are Shifting

See, even the Sunbelt is losing its status as the auto industry's North American epicenter as more production is shifted to Mexico. Analysts say roughly 40% of all North American auto jobs are now in Mexico, up from 27% in 2000.

The Sunbelt accounts for another 30%, meaning two-thirds of all auto jobs (seen as a proxy for production) are now outside the industrial Midwest.

These trends are particularly important for technology investors because new cars and trucks have become showcases for such components as sensors, semiconductors, micro-controllers, and GPS, to name a few.

And make no mistake; we're in the midst of a major auto boom...

Double- and Triple-Digit Increases Mark the Trend

Consider that last month, U.S. sales rose 11% to 1.6 million vehicles. On an annualized basis, that amounts to a rate of 16.77 million cars and light trucks, according to market researcher Autodata Corp. Moreover, that's a 16% increase from the same month in 2012.

Here's the thing: Sales in China over the past two years are growing at twice that 16% rate, according to analysts at Scotiabank. They're projecting 2014 sales of 18.86 million vehicles, for a two-year gain of 39%.

And when you take the long view, the global market looks even more impressive. For instance, over the past quarter century, auto sales in Eastern Europe are up 245%. Over the same period, they've gained 190% in Latin America and 334% in Asia.

That's why I think investors would do well to take a look at the First Trust NASDAQ Global Auto Index Fund (Nasdaq: CARZ). This is an exchange-traded fund (ETF) that offers a broad play on the global auto industry.

Just take a look at what's happening with the nation's largest "domestic" automaker, General Motors Co. (NYSE: GM). It's one of the fund's largest holdings.

Among GM's top five global markets by volume, China and the United Kingdom posted the largest sales increases last year on a percentage basis. Each gained 11%.

GM's Cadillac brand did even better in China, growing sales some 67% to a record 50,005 vehicles. Cadillac broke ground on a new assembly plant there last year and plans to add one new model per year in the country through 2016.

Meanwhile, archrival Ford Motor Co. (NYSE: F) is another major CARZ holding with significant global sales. This year, it plans to open two plants in the Asia-Pacific region and one in Latin America.

Last year, Ford sold nearly a million wholesale vehicles in China, a 49% increase. In 2014, the company expects to launch more new vehicles globally than it has in more than a century. And it still makes the top-selling vehicle in the U.S. - the popular F150 pickup truck.

Global Exposure to a Surging Market

Of course, there's much more going on with CARZ than just two big American nameplates.
Of the nearly 40 companies the fund owns, all but four have their headquarters outside the U.S.

For instance, Hyundai Motor Co. (OTC: HYMTF) is based in South Korea. Combined with its affiliate Kia Motors Corp. (OTC: KIMTF), Hyundai ranks as the world's fifth-largest automaker.

The company has taken recent steps to appeal to a global audience by unveiling a luxury sedan to compete with higher-end automakers like BMW. Moreover, India is a big market for the company and accounts for around 15% of its global sales.

Great Wall Motor Co. Ltd. (HKG: 2333) is a China-based automaker listed on the Hong Kong Stock Exchange. By specializing in SUVs and trucks - a growing trend in China - the company has become the largest Chinese manufacturer of such vehicles.

Great Wall has expanded its operations into Eastern Europe and other overseas locations. It has also been steadily featured on the Forbes Top 100 list of Chinese enterprises since 2004.

And Tesla Motors Inc. (NASDAQ: TSLA) gives CARZ a significant stake in the burgeoning electric vehicle market. Based in California, Tesla provides transformative technology and is using it as a global sales hook.

Tesla is working on its global brand by devising a low-priced car for the Chinese auto market. It also has big plans for Europe, where it's building a network of charging stations called Superchargers. Currently, the company has only 14 Superchargers spread across Norway, Germany, Switzerland, and the Netherlands.

But by the end of the year, Tesla will install more in those countries and also will expand into the UK, France, Spain, Italy, Austria, Denmark, and Sweden. Tesla CEO Elon Musk says the move will make it possible "to travel almost anywhere in Europe using only Superchargers" as a fuel source.

Priced at roughly $40, CARZ offers investors the chance to get a piece of Tesla at a fraction of the price of the carmaker's stock, recently trading at $204 a share.

And over the past two years, the fund has given investors 69% gains. That's nearly 40% better than the S&P 500's performance during that period.

Thus CARZ gives investors three main advantages - a play on tech-centric new vehicles, the long-term growth in the global auto market, and superior returns.

The auto tech boom is just one of the high-profit trends Michael is following. To get all of his Strategic Tech Investor research and recommendations delivered free, twice weekly, click here..

Source : http://oilandenergyinvestor.com/2014/06/solar-roadways-turning-pavement-power/

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