Cars are a necessary part of life for many of us, however that doesn't make paying all the bills any more bearable. The petrol, repairs, insurance, registration, and tyres… the list goes on and on and companies make money at each step of the process.
Falling Sales
ABS data shows that sales of new cars fell by approximately 1% year-on-year, but does this really matter to investors?
Sure, if you invest in new car dealerships like AP Eagers Ltd (ASX: APE) and Automotive Group Holdings Ltd (ASX: AHE) then you might be feeling the pain, but if new cars aren't being bought then it implies a turnover of older cars that typically have higher insurance and maintenance costs as well as being less efficient. The companies that service these older cars is where the big money is being made.
Top Car Stocks
Australia's dominant car sale marketplace, carsales.com.au, is owned by Carsales.Com Ltd (ASX: CRZ) and is going strong despite the fall in new car sales. The group generates revenue from second hand car yards and individuals placing ads on the website, where demand remains strong.
Similarly, car parts retailers like Burson Group Ltd (ASX: BAP) and ARB Corporation Limited (ASX: ARP) continue to see strong demand from hobbyists and auto workshops repairing older cars, while panel beaters AMA Group Ltd (ASX: AMA) could generate higher revenue as owners opt to repair older cars instead of replacing them.
Additionally, car workshops that start to service an ever-increasing array of international models may find the part catalogue software from Infomedia Limited (ASX: IFM) increasingly attractive. Infomedia has more than 50,000 dealers in 160 countries using its software so a little improvement in Australia might not cause a share price spike, however every little bit helps.
In terms of insurance, QBE Insurance Group Ltd (ASX: QBE) and Suncorp Group Ltd (ASX: SUN) are both active in the local market.
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