Nissan, Stellantis among top picks as Nomura assesses auto stocks
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In a review of the global auto industry, a team of analysts at Nomura indicated that while Japanese and US auto demand is likely to remain strong into 2023, the Chinese market could be far more challenging.
âWe expect market conditions for the global auto industry to vary widely across regions,
with the two largest auto markets â China and the US â ending up at the opposite ends of the spectrum,â the team said. âWithin the US, Japanese and Korean OEMs are likely to outperform, while their American peers get bogged down by their high exposure to the full-size pickup truck segment, which is correlated to slowing housing construction.â
Within China, both Tesla (TSLA) and BYD Company (OTCPK:BYDDY) are expected to remain as top performers as EV adoption continues to accelerate. Other competitors in China, both domestic and foreign, are expected to be adversely impacted by âsevere price competitionâ and falling demand into 2023. Meanwhile, Japanese hybrid players like Toyota (TM) and Honda Motor (HMC) are expected to still perform well in the massive auto market despite the inopportune market dynamics.
For the Japanese market, pent-up demand driven by parts shortages that curtailed production in recent years is expected to buoy sales even as prices rise. A similar dynamic is anticipated for Korea, offering opportunity to both Kia Motors and Hyundai (OTCPK:HYMLF). Japan and the US are projected to undergird global demand growth of 6% in 2023.
âOur global top pick is Kia; we also like Nissan (OTCPK:NSANY), Mahindra & Mahindra (OTC:MAHMF), and Stellantis (NYSE:STLA),â the analysts concluded. âWe are constructive on Kiaâs sales outlook and pricing power in 2023, growing market share in the US, limited exposure to China, and near-record-low global inventories. Despite investor concerns centered on global macro headwinds, we think underlying demand for Kiaâs models is strong.â 
For Stellantis (STLA), difficulties in its home market in Europe are expected to be offset by the opportunity available in the United States. 
âWe like Stellantis considering lower risk of margin pressure from EV battery material prices in 2023, given STLAâs appropriately paced rollout of EVs in North America, benefits from post-merger platform consolidation in Europe starting in 2023, and its limited exposure to China, which should lead to lower longer-term geopolitical risks, and insulate the company from a near-term slowdown in the region,â the team said. âThe stock appears inexpensive to us.â
Read more on Nissanâs EV investments.