We recently compiled a list of the 12 Best Automotive Stocks to Invest in According to Analysts. In this article, we are going to take a look at where Honda Motor Co., Ltd. (NYSE:HMC) stands against the other automotive stocks.
The automotive sector is navigating a complex and uncertain landscape, shaped by economic volatility, regulatory shifts, and evolving consumer demand. One of the biggest concerns recently has been the proposed 25% tariffs on goods from Mexico and Canada, which triggered a strong response from MEMA, a leading vehicle suppliers trade association. MEMA warned that such tariffs could jeopardize thousands of American jobs, raise costs for consumers, and disrupt the highly integrated North American supply chain, which is essential to maintaining U.S. competitiveness in the global auto market. While a temporary agreement to delay these tariffs provides some relief, uncertainty remains, especially as new challenges emerge, including the halt in funding for the U.S. National Electric Vehicle Infrastructure (NEVI) program. This funding pause could slow the country’s transition to EVs by limiting the expansion of charging networks and reducing incentives for adoption.
Fitch Ratings, in a report published in December, assigned a ‘neutral’ outlook to the industry, expecting 2% growth in global light vehicle sales. Pricing pressure is likely to rise as competition in the EV segment intensifies, while inflation may shift consumer preferences toward more affordable vehicles. That said, they expect interest rate cuts could support stronger vehicle demand, and automakers’ strategic diversification into EVs, autonomous tech, and digital mobility solutions remains a key growth driver.
Demand expected to remain healthy
Despite the headwinds, the automotive industry remains on a path of steady growth. MarketsandMarkets’ ‘Global Automotive Outlook-2025’ projects global light vehicle sales to grow 1.3% in 2025, reaching 85.1 million units. This growth will be fuelled by rising EV and hybrid adoption, advancements in battery technology, and the expansion of autonomous and connected vehicle initiatives. Automakers are also pushing for wider commercialization of self-driving technology, 5G connectivity in vehicles, and digital car sales platforms, shaping the industry’s future. The report further elaborates that China continues to dominate the global automotive market, accounting for over 26 million light vehicle sales in 2024, nearly 50% of the global total. The country also leads EV battery production, manufacturing over 50% of the world’s EV batteries and controlling 75% of key battery components. With a growing number of high-net-worth individuals in Asia-Pacific, the region is expected to drive market expansion in 2025, particularly in premium and EV segments.
In an article published on Forbes on January 13, 2025, Sarwant Singh, President and Chief Commercial Officer at MarketsandMarkets, highlighted some predictions made by his team for the automotive industry. One of their predictions is that EV growth will slow down due to specific policy changes making electric cars less affordable for many consumers. To counteract this, the team expects hybrid vehicle sales to increase substantially, as these vehicles combine the efficiency of electric power with the reliability of traditional engines. Additionally, software-defined vehicles (SDVs), where critical functions like steering, braking, and infotainment are managed by software, are projected to experience rapid growth over the next few years.
From an investment standpoint, the sector presents both risks and opportunities. While macroeconomic and geopolitical uncertainties persist, the industry’s long-term potential remains strong, making it an attractive space for investment despite near-term risks. On that note, let us explore the 12 best automotive stocks to invest in according to analysts.
Our Methodology
To identify the 12 best automotive stocks to invest in according to analysts, we compiled a list of U.S.-listed companies in the auto manufacturing and auto parts sectors with market capitalizations exceeding $2 billion. While we considered promising companies from both industries, we gave preference to pure-play auto manufacturers. We then ranked these companies based on their potential upside, placing the stock with the highest upside at the top. Additionally, we included the number of hedge funds holding stakes in these companies as of Q3 2024.
Note: All pricing data is as of market close on February 14.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A fleet of motorcycles and vehicles lined up in an assembly line with workers in the background.
Honda Motor Co., Ltd. (NYSE:HMC)
Upside Potential: 24%
Number of Hedge Fund Holders: 11
Honda Motor Co., Ltd. (NYSE:HMC) is a multinational automaker and motorcycle manufacturer. Its popular car models include the Civic, Accord, and CR-V, while its motorcycles, such as the Honda CBR series, dominate global markets. The company is also known as a pioneer in hybrid and electric vehicle development, producing the Insight, Clarity, and the Honda-e. The company also develops robotics, aviation technology, and hydrogen fuel cell solutions.
On February 13, Honda Motor Co., Ltd. (NYSE:HMC) and Nissan Motor Co. Ltd. (OTC:NSANY) announced the termination of their merger plan, initially signed in December 2024 and was believed to be valued at $60 billion. The decision was made after evaluating market conditions, integration structures, and stakeholder feedback. Honda Motor Co. Ltd. (NYSE:HMC) had proposed a stock swap making Nissan Motor Co. Ltd. (OTC:NSANY) a wholly owned subsidiary, but they couldn’t agree on the terms and both companies decided against integration to maintain agility in the fast-changing EV market. They will continue collaborating within a strategic partnership for electrification and intelligent vehicle development. The termination has no financial impact on either company.
Honda Motor Co., Ltd. (NYSE:HMC) is aligning its future growth with its transition to electric vehicles (EVs), planning $40 billion in investments for electrification by 2030. The company’s long-term plan targets 100% of its global vehicle sales to be EVs and fuel cell electric vehicles (FCEVs) by 2040. In January 2024, Honda Motor Co., Ltd. (NYSE:HMC) introduced a new global EV platform, the “Honda 0 Series,” with two next-generation models scheduled for launch in 2026, following the unveiling of two prototypes at CES 2025. Management is also focused on significantly reducing battery and production costs to enhance profitability. These initiatives are expected to support the company in achieving profitable growth and maintaining, as well as expanding, its market share in this highly competitive industry.
Overall HMC ranks 8th on our list of the best automotive stocks to invest in according to analysts. While we acknowledge the potential of HMC as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than HMC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.
