The automotive industry is one of the biggest spenders when it comes to advertising. General Motors (GM) paid out $928 million during the first half of 2014. In 2013, General Motor’s global advertising expenditure was $5.5 billion. It represented 3.54% of its revenue.
Toyota (TM) has become one of the top ten biggest advertising spenders in the US. The company spent $600 million during the first half of 2014. Fiat spent $589 million during the same period. It’s the third automaker on the list of the top ten advertisers in the US.
The First Trust NASDAQ Global Auto ETF (CARZ) gives investors direct exposure to vehicle manufacturers.
The key to survival in the automotive sector
The automotive industry is the world’s third largest industry in terms of research and development, or R&D, spending. In 2013, Toyota Motors spent $8.1 billion on R&D. General Motors spent $7.2 billion that year. For Toyota, spending a lot on research helps keep the competition at bay.
Automakers are consistently being challenged to make faster, smarter, and more efficient vehicles. So, innovation has taken center stage. A typical high-end car has about 70–100 microprocessors executing more than 100 million lines of code. Compare this to a Boeing 787 that has a computer that executes just 6 million lines of code.
Manufacturing cars is a complex business. It can take several years to develop a vehicle. The new Ford F-150 took about five years to complete. Its roll out will take place in January 2015.
The auto industry spent more than $100 billion globally in 2013—including $18 billion in the US. According to Strategy&—formerly Booz & Company—99% of the industry’s R&D spending comes from the industry itself. The federal government only contributes 1% of the auto industry’s R&D spending—less than the government gives to any other industry.
The auto industry is reaping rich benefits from investing in fuel efficiency improvements. We’ll discuss this in the next part of this series.
The auto industry has high operating leverage. Operating leverage represents fixed costs as a percentage of total costs. High operating leverage magnifies gains and losses.
In April so far, Italian-American auto giant Fiat Chrysler Automobiles (FCAU) has outperformed the broader market by a wide margin after underperforming in the first quarter.
Royal Dutch Shell (RDS.A) is slated to release its Q1 2019 results on May 2. Before we review the Q1 2019 estimates, let’s recap Shell’s Q4 2018 performance compared to forecasts.
United Parcel Service (UPS) is scheduled to report its first-quarter earnings results on April 25.
Cleveland-Cliffs (CLF) is expected to report its first-quarter earnings results on April 25.
While the overall cannabis sector experienced weakness on April 23, some stocks managed to gain some positive momentum in the first half of the day.
After being listed on the NASDAQ (QQQ) on March 29, Lyft (LYFT) stock has traded on a negative note so far.