There are many reasons to “Why invest in the automotive industry?”, as it is a significant driver of macroeconomic growth and technological development. The automotive industry is still one of the most profitable and strategic sectors to invest in.
The global automotive market is one of the largest and fastest-growing industries, projected to reach over $1.5 trillion market size by 2025. In emerging markets, the demand for vehicles is increasing, offering significant opportunities for growth.
Due to immense technology advancements, the automotive industry is undergoing a significant transformation, with exposure to cutting-edge technologies and the potential for substantial returns. The automotive industry also provides a major platform for valuable diversification benefits with other traditional assets such as stocks and bonds, reducing portfolio risk and increasing potential returns.
Even governments offer incentives and subsidies to encourage the development and adoption of electric and hybrid vehicles, reducing investment costs and increasing potential returns. Additionally, it is a significant source of employment and economic growth, offering a wide range of jobs across manufacturing, sales, and services to support local and regional economies and communities, providing an opportunity for extended growth.
The automotive industry is a global market, providing immense access to global markets and significant potential for growth and diversification. It also supports long-term growth with the potential for substantial returns over time. Considerable investments in long-term research centers provide valuable output for sustained growth and present significant opportunities for technological advancements and new ideas for commuting.
The shift towards electric vehicles and autonomous vehicles opens doors to more innovative thinking and design, offering a concrete investment route in the automotive industry with fewer risks, such as fluctuations in demand, supply chain disruptions, and intense competition. However, proper guidance and thorough knowledge are always important before making any investment decisions.
The major reasons are:
• A major transformation in the automotive industry is occurring due to the emergence of four disruptive technology-driven trends: diverse mobility, autonomous driving, electrification, and connectivity.
• A Compound Annual Growth Rate (CAGR) of 5.7% is expected in the automotive industry from 2020 to 2027, reaching a market size of $8.9 trillion by 2027.
• The automotive industry offers a variety of investment opportunities across the value chain, such as vehicle manufacturing, component suppliers, service providers, software developers, and mobility platforms.
• Favorable government policies and incentives are supported by the automotive industry, such as the Production Linked Incentive (PLI) scheme in India, which aims to boost domestic manufacturing of advanced automotive technology products and attract investments in the automotive manufacturing value chain.
• The automotive industry increases consumer demand and preferences for new and innovative products and services, such as electric vehicles, shared mobility, and connected features.
Sources:- Automotive revolution – perspective towards 2030 | McKinsey, Invest in Indian Automobile Industry, Automobile | Make In India, Top 10 Global Automotive Trends, 2021 – Forbes, Automotive revolution, 5 reasons to invest in a car business | AlphaGamma, Four Automotive Trends For Investors To Watch – Forbes