Last week’s global market rout impacted the Japanese Nikkei Index disproportionately more than any other as a result of Japan’s worsening recession and regional investors’ fears about the broader impact on Asia. Furthermore, with Japan falling deeper into economic decline, the concerns spread to the United States as a less-than-favorable jobs report hinted at a slowing American economy. Japanese automotive stocks felt the effects of this selloff twofold, considering their importance to the U.S. economy.
In all fairness, the growth experienced by American markets and stocks hasn’t mirrored the reality of how many Americans are feeling about the purchasing power of the dollar following years of runaway inflation. However, Japanese automakers have historically found a way to navigate the U.S. market with their lower manufacturing costs and straightforward production lines. Moreover, with the Japanese yen (JPY) falling further in reference to the dollar, Japanese automakers could see their sales in the U.S. act as a buffer to weaken domestic purchasing power. Thus, these three automotive stocks could be poised for a comeback in the following quarters should the American economy survive the coming uncertainty.
Toyota Motor (TM)
With several of the world’s best-selling car models produced by Toyota (NYSE: TM), the company and its stock are poised for continued growth despite last week’s selloffs. As a global leader in passenger vehicle sales, Toyota consistently refines its designs and expands its offerings, setting itself apart in terms of quality and reputation, while maintaining reasonable price points.
Recently, Toyota announced strong quarterly financials that should have propped the stock up, but a relatively major vehicle scandal eclipsed the good news. The scandal in question unveiled that Toyota had submitted false testing data to safety regulators in Japan to receive approval. Yet, this dishonest behavior doesn’t obscure the financial truth that TM brought in 11.84 trillion JPY in revenue and 1.33 trillion JPY in net income last quarter.
Thus, by prioritizing practicality and competitive pricing, Toyota remains a top choice in the automotive industry. Whether customers will genuinely care about Toyota’s data falsification, it’s unlikely sales momentum will slow.
Honda Motor (HMC)
Through diversification and a steadfast commitment to quality, Honda (NYSE:HMC) has earned its place as one of the world’s most reputable car brands. This reputation is often accompanied by a lower price tag compared to competitors with similar offerings. Unlike traditional luxury brands, Honda’s focus on durability means its vehicles typically remain reliable for over 200,000 miles on average.
However, it’s not just the longevity of these cars that sets Honda apart —it’s their cost-effectiveness in maintenance. Honda’s design simplicity and the use of common parts allow for mass production of replacement parts, keeping production costs low. As a result, Honda offers vehicles that remain both affordably priced and feature-rich.
With a 7.4% global market share in consumer vehicles and strong motorcycle sales, Honda stock stands out as a solid contender. This approach has contributed to Honda’s stable financial performance and a moderate buy rating.
Subaru (FUJHY)
As the year has gone by, Subaru (OTCMKTS:FUJHY) has seen relative stability before last week’s market rout sent its stock value down 24%. For investors, however, this significant dip represents a real buying opportunity as the company is likely to recover from the recent meltdown.
The reason for this is its genuinely strong financial performance in the second quarter of 2024. The company achieved 1.09 trillion JPY in revenue, leading to 84.01 billion JPY in net income. This represented a 14.7% increase year-over-year for the company’s income, which suggests it successfully curtailed expenses amid slight revenue growth.
Moreover, with the company continuing to prioritize affordability over luxury in many of its models while ensuring its all-wheel drive and fuel-efficient features remain standard, its cars could continue to compete well in a shrinking car market. As such, Subaru stock is among the automotive stocks likely to recover from last week’s market dip.
On the date of publication, Viktor Zarev did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.