Auto manufacturers are one of the sectors with the most upside in 2021 from a cyclical and secular perspective. Auto sales are due for a strong rebound, while electric vehicles (EV) and autonomous vehicles (AV) will drive long-term growth.

The average car on the road is now 12 years old, while 25% of cars are over 16 years old. Further, household finances are in good shape, while interest rates are low which will also contribute to strong demand.

Volkswagen (VWAGY) Ford Motor Company (F) appear to be solid automotive plays in the year ahead. However, one of these automakers has more merit than the other in the context of investing.

Volkswagen

VWAGY is Europe’s top automaker. Contrary to what most people think, VWAGY’s revenue stems from more than automotive sales. VWAGY also provides auto-related services and products. Featuring nine independent brands, VWAGY provides a diverse array of automobiles, each with unique merits. VWAGY’s worldwide manufacturing base makes this auto stock that much more appealing.

VWAGY is currently priced around $36 per share. This price level seems reasonable considering the stock currently has a forward P/E ratio of 13.53. VWAGY has drawn interest of late as the company plans to take on Tesla (TSLA) along with other electric automakers. If VWAGY’s plan is executed, it will sell a million electric vehicles in ’21. The bulk of these automobiles will be BEVs, short for battery-electricity vehicles. In fact, VWAGY’s electric vehicle sales for the year might even rival Tesla’s.

VWAGY has made no secret of the fact that it intends to sell three million electric vehicles every year by ’25. The company’s electric sport utility vehicle dubbed the VW ID.4 will be delivered as soon as the end of the current month throughout Europe, followed by debuts in the United States and China in the months after. Additional VWAGY electric vehicle models will ship to regional markets prior to the end of the year. All in all, VWAGY will develop and make batteries for its EV vehicles at half a dozen gigafactories throughout Europe.

VWAGY is a POWR Ratings stud with an A overall grade. This Strong Buy stock has an A grade in the Growth component of the POWR Ratings along with B grades in the Value, Stability and Momentum Components. Click here to learn more about how VWAGY fares in the Quality and Sentiment components of the POWR Ratings.

Of the 51 publicly traded companies in the Auto & Vehicle Manufacturers segment, VWAGY is ranked third. Click here to find out more about the stocks in this category.

Ford Motor Company

F’s vehicles are no longer considered inferior to those made by foreign automakers. F has quickly changed its ways, focusing on making high-quality, reliable automobiles that stand the test of time. F has strong appeal considering the fact that it is expanding its operations to make electrified vehicles. F also generates revenue through its Ford Motor Credit Company line of credit. However, more than 90% of F revenue stems from its auto sales.

F, currently trading around $12, has a respectable forward P/E ratio of 11.86. This low forward P/E indicates F is a solid value at its current price.

It is a bit concerning that the computer chip shortage will prevent F from adding key chips to its F-150 trucks. This problem might not work itself out for months, quarters or even a full year as it is a global challenge as opposed to a problem specific to a certain region or sector. F executives stated if the computer chip shortage stretches through the initial first six months of the year, the company’s adjusted operating profit for ’21 is likely to decrease by a billion or even two billion dollars. At the current moment, F’s brass anticipates adjusted operating profit will end up between $8-$9 billion for the year.

F has a C POWR Ratings grade along with C grades in the Quality and Growth components. However, F has B grades in the Value and Momentum components of the POWR Ratings. Click here to learn how F fares in the Stability and Sentiment components.

Of the 51 stocks in the Auto & Vehicle Manufacturers, F ranks 29th. Click here to learn more about the Auto & Vehicle Manufacturers segment.

The Better Buy

VWAGY is the better buy, largely because its electric vehicle push will likely surpass that of F and most other automakers. It appears as though VWAGY will be a legitimate power player in the EV industry. Add in the fact that VWAGY’s POWR Rating is superior to that of F and there is even more reason to add it to your portfolio.