The fast-paced recovery of the automobile industry positions many auto dealers nicely for solid growth. For instance, the shares of Penske Automotive (PAG), Group 1 (GPI), and Sonic (SAH) are currently trading at discounts versus their peers, and we think are uniquely positioned to benefit from the industry’s recovery. Let’s take a closer look.The U.S. automotive industry witnessed a 14.6% decline in new-vehicle sales in 2020 due to the worst recession the nation has suffered since the Great Depression in the 1930s. However, the rising demand for secondhand cars and electric vehicles (EVs) have driven the auto industry to outperform the broader market since the second half of last year. This is evident in First Trust NASDAQ Global Auto Index Fund’s (CARZ) 43.9% returns over the past nine months compared to the SPDR S&P 500 ETF Trust’s (SPY) 20.1% gains.
The auto industry’s recovery is expected to accelerate in tandem with the global economic recovery. The global motor vehicle and parts dealers' market is expected to grow at a 7% CAGR over the next five years to reach $5.68 trillion by 2025.
Given this growth potential, we think it could be wise to invest in the stock of auto dealers Penske Automotive Group, Inc. (NYSE:PAG), Group 1 Automotive, Inc. (NYSE:GPI), and Sonic Automotive, Inc. (NYSE:SAH), which have immense upside potential but are trading at discounts to their peers.