Henry Kallstrom

The First Trust NASDAQ Global Auto ETF (CARZ) is the most traded auto-focused ETF. The three-year return for the ETF is 48.32%. YTD, CARZ provided a return of 2.23%.

The automobile industry is one of the most highly concentrated industries in the world. The market continues to be dominated by a few major companies.

Auto suppliers’ contribution increased from 56% in 1985 to about 82% now. Automakers are becoming more like assemblers and less like manufacturers.

Ford (F) uses a high amount of financial leverage. Its debt-to-capital ratio is 81.1%. This is significantly above the industry average of 53.1%.

The auto industry has lower margins primarily because of intense competition. It makes it difficult for companies to pass on increases in raw material prices to the customer.

The automotive industry is geographically concentrated. The top 15 countries produce 88% of the world’s vehicles. Almost all of the G20 nations have a manufacturing unit.

As of December, gasoline prices fell by 34.4%—compared to last year. Used car purchases increased by 19.4%. Expenditure on new motor vehicles also increased.

There’s a direct correlation between the size of a country’s GDP and its automotive industry. The auto industry has been expanding at a fast pace over the past several years.

As of 2Q14, the total outstanding auto loan amount in the US hit an all-time high of $905 billion. It grew at a CAGR of 6.2%—from $711 billion in 2010.

There are higher maintenance and repair costs as a car gets older. This supports the option of leasing a vehicle.

Typically, automakers provide incentives in a slow market. They offer incentives for low-selling models. The total number of vehicles sold in the US in 2014 was 16.5 million.

The auto industry has high operating leverage. Operating leverage represents fixed costs as a percentage of total costs. High operating leverage magnifies gains and losses.

Auto firms invest huge amounts of money in research and development. They have to develop more fuel-efficient models to meet government regulations.

The automotive industry is one of the biggest spenders when it comes to advertising. General Motors (GM) paid out $928 million during the first half of 2014.

The automotive sector plays a crucial role in job creation. Car manufacturing activity has an employment multiplier value of five.

Raw materials contribute about 47% to the cost of a vehicle. On average, an automobile is 47% steel, 8% iron, 8% plastic, 7% aluminum, and 3% glass.

German automakers lead the luxury space in the US. Daimler AG had an 18.4% share. It was followed by BMW. It had a 16.8% share.

The domestic giants have a significant US presence in trucks. These automakers show their muscle in the midsize SUV segment.

The competition between light trucks and cars characterizes the US automotive market. Over the past four years, consumers steadily moved towards SUVs and pickups.

In the 1980s, the US, Europe, and Japan together manufactured 90% of the world’s vehicles. The global automakers spawned from these regions.