NEW YORK ( TheStreet) -- U.S. industrial output recorded its best gain in seven months in July as the auto sector bounced back from supply disruptions caused by the Japanese quake in March. July industrial output rose 0.9%, doubling economists' expectations. Manufacturing activity was up 0.6%, led by a 5.2% surge in motor vehicles production.

Consumer spending expanded 0.8% in July to $88.4 billion -- the highest increase in two years after declining in the prior month. Savings fell to 5% in July from 5.5% earlier. Notably, spending increased in the durable-goods category such as cars and electronic appliances. For July, orders for motor vehicles and parts surged 11.5%, the highest since January 2003.

U.S. car and truck sales for August, to be reported Sept.1, could lift auto stocks as total vehicles sales are expected to come in at 12.1 million vehicles, as per Bloomberg estimates.

Analysts polled by Bloomberg foresee potential upside of 58% to 82% for these stocks with buy rating of 61% and hold rating of 36%.

We have listed the stocks in ascending order of potential upside.

5. Spartan Motors ( SPAR), operating through five wholly owned subsidiaries, manufacturers custom-designed heavy-duty vehicles. The company organizes its activities into three segments: Spartan Chassis, the Emergency Vehicle Team (EVTeam) and Utilimaster.

For the second quarter of 2011, the company reported net loss of $2.2 million, or 7 cents per share, from $2.6 million, or 8 cents per share, in the year-ago quarter. Total sales for the quarter stood at $99.4 million with specialty vehicles accounting for $60.6 million, while delivery and service vehicles comprised the rest.

Looking ahead, the company believes that the market is challenging and it has to make efforts to reduce its cost of doing business. With backlog increasing for two consecutive quarters, the company estimates a strong 2011 second half. Consolidated backlog improved 8% to $179.3 million from the first quarter of 2011, driven by order intake momentum in the delivery and service vehicle and emergency response chassis markets.

Of the four analysts covering the stock, one recommends a buy and three rate a hold. Analysts surveyed by Bloomberg forecast an average 12-month price target of $7.50, nearly 57.6% greater than the current price.

4. Tesla Motors ( TSLA) designs, develops, manufactures and markets and sells 100% electric vehicles and electric vehicle powertrain components. The company's Tesla Roadster has a battery pack capable of storing approximately 53 kilowatt-hours of usable energy.

For the second quarter 2011, the company recorded total revenue of $58.17 million compared to $28.41 million in the year-ago quarter. Net loss for the quarter stood at $58.9 million, or 60 cents per share. Cash and cash equivalents at the end of June 2011 were $319.4 million, vs. $99.5 million at December 2010.

During the quarter, the company delivered 190 Roadsters, representing unit growth of 35% from the same quarter last year and 31% from the prior quarter. For the quarter, the company generated over $27 million in Roadster-related revenue, up 44% from the same quarter prior year. As of June 30, Tesla delivered about 1,840 Roadsters worldwide.

The company has raised its revenue guidance for full-year 2011 to range from $180 to $190 million from the earlier estimate of $170 to $185 million. Capital expenditure for the year is seen between $220 and $245 million, up from the earlier guidance of $190 to $215 million.

Of the nine analysts covering the stock, 67% recommend a buy and 22% rate a hold. Analysts surveyed by Bloomberg have an average 12-month price target of $40.20 for the stock, which is 63.2% higher than the current price.

3. General Motors ( GM), a global auto major, develops, produces and markets cars, trucks and parts worldwide. The company operates in five segments: GM North America (GMNA), GM Europe (GME), GM International Operations (GMIO), GM South America (GMSA) and GM Financial.

Net income for 2011 second quarter was reported at $2.5 billion, or $1.54 per share, marking the GM's sixth consecutive profitable quarter. For the quarter, revenue increased $6.2 billion to $39.4 billion, vs. the second quarter of 2010. At the end of the quarter, GM recorded strong total automotive liquidity of $39.7 billion.

Retail sales for July rose 6% year-over-year. Meanwhile, GM dealers in the U.S. recorded total sales of 214,915 units in July, up 8% from the same month in 2010. The company expects U.S. full year industry volume will remain in the range of 13 to 13.5 million units, likely touching the lower range.

The company expects adjusted EBIT in the second half of 2011 to be modestly lower than in the first half. Also, for full year 2011, adjusted EBIT would indicate a strong improvement over 2010 levels.

Of the 20 analysts covering the stock, 75% recommend a buy and the rest suggest a hold. There are no sell ratings on the stock. Analysts polled by Bloomberg project an average 12-month price target of $41.12, up 74.4% from the stock's current price.

2. Ford Motor Company ( F), a producer of cars and trucks, operates in two segments: Automotive and Financial Services. The automotive segment includes the operations of Ford North America, Ford South America, Ford Europe and Ford Asia Pacific Africa.

For the second quarter 2011, the company recorded net income of $2.4 billion, or 59 cents per share. Automotive pre-tax operating profit was $2.3 billion, an increase of $209 million from 2010 second quarter. Revenue for the quarter was $35.5 billion, up $4.2 billion from the same quarter prior year. Total vehicle wholesales in the second quarter stood at 1.5 million units, up 101,000 units from the same quarter prior year.

The company recently said that despite slower industry growth and elevated competition, Ford Motor China recorded 13% year-over-year increase in sales to 306,830 wholesale units for the period January to July. Additionally, as part of its accelerated expansion plans for China, Ford plans to launch 15 new vehicles by 2015 and is in the process of building four new plants with partners.

Ford estimates 2011 capital expenditure to be in the range of $5 billion to $5.5 billion, with almost $2 billion spent in the first half of 2011. For the third quarter of 2011, the company expects production at 1.4 million units, an increase of 92,000 units from the year-ago quarter. The company has announced plans to triple its production capacity of electric vehicles in the U.S. to more than 100,000 by 2013.

Of the 20 analysts covering the stock, 70% recommend a buy and the rest suggest a hold. There are no sell ratings on the stock. Analysts polled by Bloomberg project an average 12-month price target of $19.15, up 76.2% from the stock's current price.

1. Navistar International ( NAV), a holding company, is a manufacturer of international brand commercial and military trucks. The company's operations are divided into four segments: truck, engine, parts and financial services. Besides, it also provides service parts for all makes of trucks and trailers. The company acts as a private-label designer and manufacturer of diesel engines for the pickup truck, van and sport utility vehicle (SUV) markets.

Net income for the second quarter of 2011 was reported at $74 million, or $1.02 per share, compared to $43 million, or 60 cents per share, in the year-ago quarter. Sales and revenue for the quarter increased 22.3% to $3.3 billion from $2.7 billion recorded in same quarter prior year. During the quarter, truck production volume increased nearly 34% from first quarter levels.

The company recently announced a restructuring program for its North American operations, to drive greater manufacturing flexibility. It intends to close its Ontario truck manufacturing operation, which has been idle since June 2009. Further, it plans to scale back operations at its Monaco headquarters and motor coach manufacturing plant in Coburg, Ore. With the majority of restructuring to begin in the third and fourth quarters of 2011, the company expects ongoing savings of $20 to $30 million annually, once all measures are implemented.

The company has reaffirmed its 2011 guidance and estimates earnings per share in the range of $5.5 to $6.00. Full-year consolidated revenue is pegged between $13.6 and $14.3 billion. Additionally, global units are expected to increase upwards of 60% from the first half to the second half of 2011, at approximately 29,000.

Of the 17 analysts covering the stock, 71% recommend a buy and the rest rate a hold. There are no sell ratings on the stock. Data from Bloomberg has analysts reporting an average 12-month price target of $75.77, up 82.3% from the stock's current price.

>>To see these stocks in action, visit the 5 Auto Stocks to Watch portfolio on Stockpickr.