Toyota Motor Corporation (ADR) (TM), Honda Motor Co Ltd (ADR) (HMC): Japanese Brands Making Big Moves in the Auto Industry

For instance, “the launch of several all-electric vehicles by both Nissan and Renault demonstrates the alliance’s ability to jointly develop and bring to market a significant, game-changing product while taking advantage of scale to reduce investment in the project.” (Morningstar) Moreover, the alliance has helped the firm better navigate the post-earthquake period, losing less production capacity than its competitors.

Producing all-electric vehicles places Nissan in an advantageous position. The product has the potential to not only attract ever-increasing customers, but also government support. Emerging markets, especially India and Russia, provide further opportunities for expansion, and acquisitions have played a very important role in the firm’s penetration in these countries.

The U.S. market remains strong, as well. With the Yen depreciating and Nissan’s electric cars much cheaper, recent results portray an encouraging outlook. Demand is also strengthening in China, providing further space for development.

Despite some promising prospects and growth catalysts, analysts expect Nissan to under-perform its peers in terms of EPS growth, delivering an annual rate in the 10%-13% range over the next five years. However, being undervalued in relation to its peers, trading at 13.7 times its earnings, I’d recommend buying and holding on to this stock for the long-term.

Bottom line

Lower social security expenses coupled with a weak Yen provide plenty of growth opportunities for these well-known brands. Although all three offer compelling outlook for the years to come and I would recommend adding all of these shares to your long-term portfolio, my number-one choice would be Toyota Motor Corporation (ADR) (NYSE:TM) for its potential and scale. Don’t miss out; Japanese cars will most likely be gaining market share in several big markets over the next few years.

Victor Selva has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Victor is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article 3 Japanese Brands Making Big Moves in the Auto Industry originally appeared on Fool.com and is written by Victor Selva.

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