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 Toyota Motor Corporation (NYSE:TM) 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).
Workers assembling a car in a modern manufacturing plant, emphasizing the company’s sense of progress.
Toyota Motor Corporation (NYSE:TM)
Upside Potential: 21%
Number of Hedge Fund Holders: 18
Toyota Motor Corporation (NYSE:TM) is a global automobile manufacturer. It produces a wide range of vehicles, including sedans, SUVs, and trucks, with popular models like the Corolla, Camry, and RAV4. The company pioneered mass-produced hybrid technology with the Prius and continues to expand its electric and hydrogen-powered vehicle lineup, including the Mirai fuel cell car and the bZ4X electric SUV. The company is also investing in autonomous driving, AI, and mobility services.
On February 5, Toyota Motor Corporation (NYSE:TM) reported its Q3 FY 2025 results (FY ending March 2025), where it witnessed a 4% year-over-year (YoY) decline in global vehicle unit sales for the first nine months of FY 2025. Japan unit sales were down over 10% whereas overseas units were down 2.1%. Despite this, total sales increased around 5%. Moreover, profit also increased due to ongoing cost-saving initiatives and improvement in product competitiveness which are supporting earnings. As per Statista, Toyota Motor Corporation (NYSE:TM) had 10.7% global automobile market share in 2024 and thus holds the top position globally. The company continues to solidify its position as the global leader in the automotive industry, leveraging its diversified powertrain strategy, including hybrid, electric (EV), hydrogen fuel cell, and internal combustion vehicles.
On February 6, Macquarie analyst upgraded Toyota Motor Corporation (NYSE:TM) from Neutral to Outperform. The analyst anticipated the company would report weaker earnings due to a slower-than-expected volume recovery. However, they also projected that Toyota’s production would stabilize, resulting in less exciting earnings, but improved quarters ahead.
Overall TM ranks 10th on our list of the best automotive stocks to invest in according to analysts. While we acknowledge the potential of TM 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 TM 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.
