This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Industry Insight: Can Cars Be Profitable?

DETROIT ( TheStreet) -- After the collapse of General Motors (GMGMQ) and Italian automaker Fiat's investment in the bankrupt Chrysler, the American car industry looks completely different from just a year ago.

With Ford (F - Get Report) being the only company still financially viable from the Big Three, foreign companies' shares have become investors' main options. However, even the relatively strong Honda (HMC - Get Report), Toyota (TM - Get Report), Volkswagen and Nissan (NSANY) have suffered huge declines in sales.

The question is: Is it possible for any car maker to turn a profit big enough to satisfy investors? After all, car sales tumbled 35% in the first six months of the year. While the drop has been less severe for foreign manufacturers, their sales are still down 25% on average.

Competitive factors in the auto industry are massive and put a big damper on profits. Consider the following factors influencing the industry before betting on car stocks:

Degree of Rivalry: The average person off the street would have a difficult time naming all the car brands available in America today. There is a dizzying array of vehicles for sale, many of which are simply variations on other offerings by the same company under a different brand name. In an effort to develop a brand for every conceivable consumer, the auto industry has become an overly crowded market that can't get out of its own way.

Fierce competition in the industry has led to an ever-decreasing ability to produce a profit. Companies regularly cannibalize their own sales with identical models across brands and flood markets with more dealerships than an area can support. With a credo of "more is more," it seems the car industry is content with fighting tooth and nail for sales rather than working smarter on better products that meet customers' needs.
1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
NSANY $17.93 -5.62%
F $14.10 3.20%
HMC $27.24 -4.30%
TM $102.90 -3.30%
AAPL $94.60 -3.30%


Chart of I:DJI
DOW 17,833.91 -207.64 -1.15%
S&P 500 2,077.13 -18.02 -0.86%
NASDAQ 4,812.3680 -50.7730 -1.04%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs