The automotive industry is a complex ecosystem, and within it, Car Parts Stocks present unique opportunities for a diverse range of investors. Whether you’re drawn to the high-growth potential of electric vehicle (EV) technologies or prefer the stability of recession-resistant markets, car parts stocks offer compelling options. Let’s explore the key players and sectors within this industry to guide your investment decisions.
Understanding the Car Parts Stock Landscape
Investing in car parts stocks involves understanding different segments within the automotive industry. A helpful way to categorize these investments is by considering three overlapping themes:
- Aftermarket and Replacement Parts: These companies thrive on vehicle maintenance and repairs. The demand for their products is driven by the existing car parc and the miles driven by vehicles.
- Original Equipment Manufacturer (OEM) Suppliers: These companies provide parts directly to car manufacturers for new vehicle production. Their performance is closely tied to light vehicle production (LVP), encompassing cars, SUVs, and light commercial vehicles.
- Content Per Vehicle (CPV) Growth: Many OEM suppliers focus on increasing the value of their products in each vehicle through technological advancements and evolving consumer demands. This strategy aims to boost revenue even if vehicle production volume remains constant.
While these categories are not mutually exclusive – many companies operate across multiple segments – they provide a useful framework for navigating the world of car parts stocks and the broader transportation industry.
| Company | Market Capitalization | Key Activity |
|---|---|---|
| LKQ (NASDAQ:LKQ) | $10 billion | Vehicle replacement parts for collision and mechanical repairs. Minor OEM business. |
| Goodyear (NASDAQ:GT) | $2.7 billion | Tire manufacturer for various vehicles including cars, trucks, and aircraft. |
| O’Reilly Automotive (NASDAQ:ORLY) | $70.2 billion | Retailer of automotive parts. |
| Snap-on (NYSE:SNA) | $18.3 billion | Tools, equipment, and diagnostics for automotive professionals. |
| Axalta Coating Systems (NASDAQ:AXTA) | $7.9 billion | High-performance coatings for vehicles. |
| Aptiv (NYSE:APTV) | $14.4 billion | Vehicle components focusing on electrical systems, safety tech, and networking. |
| Autoliv (NYSE:ALV) | $7.6 billion | Passive safety systems like airbags and seatbelts. |
| BorgWarner (NYSE:BWA) | $7.1 billion | Propulsion systems and electrification technologies for vehicles. |
| Gentex (NASDAQ:GNTX) | $6.4 billion | Dimmable mirrors, digital vision, and advanced automotive electronics. |
Key Players in Car Parts Stocks: Aftermarket & Replacement
LKQ Corporation (LKQ): Leader in Aftermarket Parts
LKQ Corporation (LKQ) is a dominant force in the aftermarket and replacement car parts sector. This market segment offers stability as its growth is linked to vehicle usage. The more miles vehicles travel, the greater the need for collision repairs and general wear-and-tear replacements, benefiting LKQ’s business.
With a global presence, LKQ holds leading positions in both North America and Europe. Their strategy revolves around leveraging their extensive scale – built through approximately 300 acquisitions – to enhance market share by maintaining a larger inventory of car parts stocks than competitors.
Goodyear Tire & Rubber (GT): Focusing on Replacement Tires
Tire manufacturers like Goodyear (GT) primarily serve the replacement market, with roughly 75% of their unit sales coming from replacing worn tires rather than supplying OEMs. For investors interested in aftermarket car parts stocks, assessing a company’s ability to gain market share is crucial for growth.
Goodyear initiated its “Goodyear Forward” plan in late 2023, aiming to reduce costs by $1 billion by the end of 2025 through measures like footprint optimization and plant rationalization. This initiative also targets a $350 million improvement in operating profit in 2024.
Furthermore, Goodyear has recently agreed to sell its Dunlop brand to Sumitomo as part of the “Goodyear Forward” strategy, with the transaction anticipated to close in mid-2025. Such strategic moves are often seen in environments characterized by slow sales and increasing operational costs.
O’Reilly Automotive (ORLY): Recession-Resistant Retailer
The expansive aftermarket sector offers numerous avenues for investment in car parts stocks. Key indicators to monitor within this sector include vehicle miles traveled and the average age of vehicles on the road. Increased mileage leads to more vehicle servicing needs, and older vehicles typically require more frequent and extensive repairs.
This trend is favorable for auto parts retailers such as O’Reilly Automotive (ORLY), AutoZone (AZO), and Advance Auto Parts (AAP). These companies are often considered recession-proof car parts stocks because during economic downturns, consumers tend to postpone new car purchases, opting to maintain their existing vehicles for longer. This scenario directly boosts the demand for replacement parts and maintenance services.
Alt text: O’Reilly Auto Parts store exterior displaying a wide range of car parts stocks and automotive supplies.
Among these retailers, O’Reilly Automotive stands out due to its stronger presence in the Do-It-For-Me (DIFM) market, which is projected to grow faster than the Do-It-Yourself (DIY) segment. The increasing complexity of modern vehicles drives the DIFM market, as many repairs require professional expertise. O’Reilly’s efficient parts delivery system further enhances its appeal to DIFM customers, ensuring mechanics have the necessary car parts stocks promptly.
Snap-on (SNA): Tools and Diagnostics for Professionals
Snap-on (SNA) operates globally, providing tools, diagnostic equipment, and information systems to vehicle dealerships and repair shops. Notably, nearly two-thirds of Snap-on’s sales are directed towards vehicle repair facilities and automotive technicians.
Demand for Snap-on’s products is primarily driven by the volume of vehicles being serviced and the growing sophistication of vehicle systems. The increasing average age of light vehicles in the U.S. also contributes to sustained demand for vehicle servicing and, consequently, for Snap-on’s professional-grade tools and diagnostics.
Axalta Coating Systems (AXTA): Coatings for Aftermarket and OEM
Another nuanced approach to investing in car parts stocks is through companies specializing in automotive paints and coatings. Axalta Coating Systems (AXTA) is a noteworthy example, with the automotive sector constituting approximately three-quarters of its revenue. The refinish market represents Axalta’s highest-margin segment.
Axalta provides investors with exposure to both the aftermarket (refinishing) and OEM car parts stocks markets. Regardless of the powertrain – internal combustion, hybrid, or electric – all vehicles require coatings. This positions Axalta as a resilient investment within car parts stocks, capable of performing across diverse market conditions and technological shifts in the automotive industry.
Key Players in Car Parts Stocks: Original Equipment Manufacturers (OEMs)
Aptiv (APTV): Technology and Future of Mobility
Leading U.S.-listed OEM parts suppliers include Magna International (MGA), Lear Corporation (LEA), Aptiv (APTV), BorgWarner (BWA), and Autoliv (ALV).
The primary distinction between OEM and aftermarket car parts stocks lies in their demand drivers. Investors in OEM suppliers closely monitor light vehicle production (LVP) figures. Higher production volumes typically translate to increased profits for these suppliers. Therefore, car production rates are a key metric for evaluating OEM car parts stocks.
The OEM market is characterized by a concentrated customer base – primarily major car manufacturers – whereas the aftermarket serves a much broader and fragmented customer base. For instance, Aptiv’s clientele includes the top 25 automotive OEMs globally.
Consequently, OEM supply contracts are highly competitive. Suppliers cultivate close relationships with manufacturers, often establishing production facilities near OEM plants and collaborating closely on product development. The core objective for OEM suppliers is to secure contracts that capitalize on rising LVP and increase CPV.
Aptiv aims to achieve this by focusing on key automotive megatrends: vehicle safety, electrification, connected car technologies, and the foundational architecture for autonomous vehicles. This positions Aptiv as both a technology-driven investment and a play on the growth of OEM car parts stocks and overall vehicle production.
Autoliv (ALV): Safety Systems and Global Production
Autoliv (ALV) has historically achieved sales growth at a mid-single-digit rate, outpacing the low-single-digit growth rate of LVP. This outperformance is largely attributed to advancements in safety technology and the widespread adoption of airbags and seatbelts in vehicles. Autoliv claims approximately 45% of the global market share for passive safety systems, providing investors with an opportunity to benefit from both increasing global car production and heightened safety awareness in vehicles.
BorgWarner (BWA): Transitioning to Electrification
BorgWarner (BWA) traditionally focused on drivetrain and powertrain solutions for internal combustion engine (ICE) vehicles. However, with the automotive industry’s shift towards hybrids and EVs, BorgWarner is strategically investing in propulsion systems for these vehicles. They have made significant acquisitions in electrification, including the 2020 purchase of Delphi Technologies (power electronics), to enhance their CPV in electric light vehicles.
While ICE vehicles will remain relevant for years, OEM car parts stocks suppliers must adapt to the long-term transition to hybrid and electric powertrains. BorgWarner is proactively expanding its “eProducts” portfolio (EV-related solutions) to prepare for evolving consumer preferences and the increasing demand for EVs.
Gentex (GNTX): Innovative Vision and Dimmable Technology
Investors seeking a relatively stable technology-focused investment within car parts stocks may find Gentex (GNTX) appealing. Gentex specializes in digital vision and dimmable mirror technologies and is the dominant supplier of automatic-dimming rearview mirrors to the automotive industry, with Magna International as a distant second.
Dimmable mirrors are typically offered as premium vehicle options, and Gentex’s management anticipates revenue growth as automakers increasingly incorporate them as standard or more frequently chosen features. Furthermore, Gentex is pursuing growth opportunities by expanding sales of its full-display mirrors and camera systems, catering to rising consumer demand for advanced automotive technologies.
Alt text: Gentex automatic dimming rearview mirror integrated into a car interior, highlighting innovative car part technology.
Investing in Car Parts Stocks: Key Considerations
The car parts industry presents a spectrum of investment opportunities catering to various risk appetites. From high-growth, potentially higher-risk technology-driven stocks to more balanced options and recession-resistant aftermarket plays, car parts stocks offer diversity.
When considering car parts stocks, align your investment choices with your risk tolerance and your outlook on the automotive industry’s future. For OEM parts stocks, closely monitor industry forecasts for light vehicle production (LVP) and suppliers’ strategies to increase content per vehicle (CPV). For aftermarket car parts stocks, track vehicle miles driven and the competitive landscape within specific market segments.
FAQs on Car Parts Stocks
What are the top car parts companies?
The top five U.S. listed car parts companies, based on market capitalization and industry influence, are Aptiv, Magna International, LKQ Corporation, Autoliv, and Gentex.
How profitable is the car parts business?
Profitability varies significantly within the car parts industry. Among companies with a market capitalization exceeding $2 billion, Gentex demonstrated an impressive operating profit margin of nearly 22% in 2023. LKQ, Aptiv, and Autoliv reported profit margins in the high single digits to low double digits, while Goodyear and Magna International had relatively lower mid-single-digit margins.
Is the car parts industry growing?
The car parts industry generally experiences low single-digit growth, particularly for companies focused on traditional internal combustion engine components. However, some companies, like Magna International, are actively pursuing higher growth rates by concentrating on parts relevant to electric vehicles and future automotive technologies.
