Construction
and industry are what many great nations have been built on. In the midst of
the industrial revolution the first automotive was created in 1806, since then
they have played a fundamental role in the growth of the global economy. Now around 62 million cars are sold around
the world each year.
During the
credit crisis one of the most affected sectors hit was the automotive industry. As many see cars as a luxury, new car
purchases crashed to the floor. A number
of companies sought emergency loans, most notably GM Motors, Ford and Chrysler
receiving a record bailout from the U.S and Canadian government of around
$85bn.
These big
three have recovered somewhat since 2008, however global competition has been
ever increasing. Since the start of the
Eurozone, Germany its primary contributor has benefited hugely and as one of
the major producers of cars they have seen profits rise significantly on the
back of a weaker currency.
Asia
follows suit as currency plays a key role in exports. Japan has historically been a major producer
of cars, such as Toyota and Honda. However,
these companies have been hampered over recent years by the strengthening Yen
and until recently has had trouble competing with the likes of South Korea and
China. Since the
introduction of the new Prime Minister, Shinzo Abe, the Yen has weakened significantly
by around 20% and this will inadvertently roll through to company profits.
The gathering
pace in automotive industry should start to show in company profits by April,
and a number of funds are well positioned for this. Aberdeen Japan Growth and JOHCM Japan have a
heavy weighting in the automotive sector and would be my pick.
Over the
past twelve months, we have seen consecutive rises in auto sales and this is a
good sign the global recovery is gathering pace. This lagging indicator has a powerful message
and is one to look out for.
No comments:
Post a Comment