5 ETFs to Play the Auto Industry’s Comeback

January 6th at 2:00pm by Tom Lydon

The U.S. auto industry returned to profitability last year and sales are expected to surge higher this year. Though there is currently no automobile exchange traded fund (ETF) available, that won’t stop you if you want to get exposure to this comeback story.

U.S. auto sales could increase by 12.9 million cars this year, with total deliveries rising by 11% from 2010, reports Craig Trudell for Bloomberg. Morgan Stanley provided an even more optimistic outlook, stating that sales could rise to 14 million this year, driven by a “V-shaped” recovery, analyst Adam Jones adds. Talk about coming back from the brink:

  • Ford Motor (NYSE: F) brought in $6.37 billion in earnings through three quarters of 2010.
  • General Motors (NYSE: GM), Ford and Chrysler Group LLC all reported better-than-expected sales, which put the industry’s annual sales rate at 12.6 million, ending in December. GM and Ford executives believe that auto sales could top 13.5 million.
  • For December, GM’s monthly sales jumped 7.5%, Ford sales increased 3.5% and Chrysler’s sales surged 16%.
  • Meanwhile, Toyota Motor Corp. (NYSE: TM) reported sales declines after the company announced its 8 million auto recalls as related to unintended acceleration.
  • According to Autoweek, “most every automaker gained sales in December, a month highlighted by a 37% surge for Hyundai-Kia and a 28% advance at Nissan North America,” writes Jim Sharifi for U.S. News.

As stated by The Wall Street Journal, “The emergence of seven major car makers means companies can no longer focus on besting a single rival, as they did years ago when GM was on top, or in recent years when Toyota set the bar for quality and reputation.” Now, companies will have to produce an edge to stand out in the consumers’ eyes.

Having seven major car makers strengthens the case for ETFs – you can get exposure to many of them in one swoop. Get exposure to a few or many of them in these funds:

  • First Trust IPOX-100 Index Fund (NYSEArca: FPX ). GM is 10.3%.
  • BLDRS Asia 50 ADR Index (NASDAQ: ADRA ). Toyota is 8.6%, Honda is 5.2%, Mitsubishi is 5.4%.
  • Consumer Discretionary Select Sector SPDR (NYSEArca: XLY ). Ford is 5.2%.
  • iShares Dow Jones U.S. Consumer Goods (NYSEArca: IYK ). Ford is 4.1% and GM is 1.5%.
  • SPDR S&P International Consumer Discretionary (NYSEArca: IPD): Toyota is 6.7, Daimler Chrysler is 4%, Honda is 3.7% and Hyundai is 1.8%.

If you’d rather just wait for an auto ETF, Direxion Auto Shares is in registration, though no launch date has been announced.

For more information on car industry, visit our automobiles category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.