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2 Foreign Auto Stocks Powering Ahead in a Downbeat Industry
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The Zacks Automotive – Foreign industry reflects a mix of opportunity and caution as regional markets navigate different growth trajectories. China continues to dominate with strong domestic demand and rapid electrification, supported by government incentives and trade-in programs. Europe’s automakers, however, remain under strain, juggling tariffs, regulatory costs, and fierce Chinese competition even as sales show tentative recovery. Japan’s market is losing momentum, with consumers favoring hybrids over fully electric models, reflecting a slower path to full electrification. Meanwhile, India stands out for its steady retail growth, policy-driven reforms, and expanding EV transition. Given the industry dynamics, a few stocks like Geely Automobile Holdings Limited (GELHY - Free Report) and XPeng Inc. (XPEV - Free Report) make for smart investment choices now.
Industry Overview
Companies in the Zacks Automotive – Foreign industry are involved in designing, manufacturing and selling vehicles, components, as well as production systems. The foreign automotive industry is highly dependent on business cycles and economic conditions. China, Japan, Germany and India are some of the key foreign automotive manufacturing countries. The widespread usage of technology is resulting in the fundamental restructuring of the market. Stricter emission and fuel-economy targets and ramp-up of charging infrastructure, as well as supportive government policies, are boosting sales of green vehicles. With almost all firms intensifying their electrification game, competition is getting tougher with each passing day. Foreign automakers are now actively engaged in the R&D of electric and autonomous vehicles, fuel efficiency and low-emission technologies.
Key Investing Themes
China’s Auto Market Powers Ahead: China’s auto market continues to expand steadily, supported by strong domestic demand and sustained government incentives. Years of subsidies and policy support have positioned China as the world’s largest electric vehicle EV market. According to the China Passenger Car Association, domestic car sales rose 6.6% year over year to 2.27 million units in September 2025, following a 4.9% increase in August. Sales of electric and hybrid vehicles accounted for 57.2% of total sales, up 15.5% from a year earlier. The China Association of Automotive Manufacturers projects total vehicle sales to reach 32.3 million units in 2025, about 3% higher than 2024, with new energy vehicle sales expected to jump 20% to 15.5 million units. Supported by trade-in incentives and robust economic activity, China’s auto market remains on a firm growth path, driven by accelerating electrification and resilient consumer demand.
Europe’s Auto Industry at Crossroads: Europe’s auto industry is navigating a challenging environment marked by trade tensions, competitive pressure and the costly shift to electrification. The sector remains squeezed by U.S. tariffs, strong competition from Chinese automakers, and strict EU regulations on electric vehicle adoption. Despite these headwinds, there are signs of stabilization. According to European Automobile Manufacturers’ Association, new car registrations in the EU rose 0.9% year to date through September 2025, following a 2.4% decline in the first half of the year. September alone saw a robust 10% jump, helped by the launch of new models, marking the third straight month of growth. However, battery-electric vehicles held a steady 16.1% share—below the pace needed for the region’s green transition. Overall, while recent momentum suggests recovery, Europe’s automakers still face an uphill battle to balance competitiveness, affordability and sustainability in an increasingly crowded global market.
Japan’s Car Industry Slows Its Pace: Japan’s auto market has shown moderate growth in 2025, but signs of cooling are emerging. According to Focus2Move.com, year-to-date car sales through September rose 5.1% from a year earlier, though monthly volumes have declined for three straight months, signaling a slowdown in momentum. Japan’s EV segment continues to lag, with sales down 11.9% through August and accounting for just 2% of total car sales. Despite government incentives, consumer demand for fully electric vehicles remains limited, as buyers continue to favor hybrids. Japan’s cautious approach to electrification reflects limited EV supply chain investment and energy security concerns. With both the government and automakers prioritizing hybrid and hydrogen technologies, the country’s transition to full battery electrification is expected to remain gradual compared with other major markets.
India’s Auto Sector Gains Traction: Per Hindustan Times, India’s auto retail sector maintained steady growth in the first half of FY26 (April–September 2025), with total vehicle registrations rising 3.4% year over year. The outlook remains positive as structural reforms and shifting consumer trends reshape its trajectory. The implementation of the GST 2.0 reform has recalibrated automobile taxation, reducing the rate on small cars from 28% to 18%. This move is expected to make affordable vehicles more accessible to India’s growing middle class, supporting demand in the mass-market segment. Meanwhile, the country’s accelerated transition toward electric mobility is further redefining its automotive landscape. Overall, industry participants remain optimistic that policy support, rising affordability, and evolving consumer preferences will sustain growth in the coming quarters despite global headwinds.
Zacks Industry Rank is Discouraging
The Zacks Automotive – Foreign industry within the broader Zacks Auto-Tires-Trucks sector currently carries a Zacks Industry Rank #204, which places it in the bottom 16% of around 245 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Over the past year, the industry’s earnings estimates for 2025 have moved 37.5% south. Estimates for 2026 have also been revised downward by 34.8% over the same timeframe.
Still, we will present a few stocks that are worth adding to your portfolio. But before that, let’s look at the industry’s recent stock market performance and current valuation.
Industry Lags Sector and S&P 500
The Zacks Automotive – Foreign industry has underperformed the Auto, Tires and Truck sector and the Zacks S&P 500 composite over the past year. The industry has risen 11% compared with the S&P 500 and the sector’s growth of roughly 20% and 41%, respectively.
One-Year Price Performance
Industry's Current Valuation
Since automotive companies are debt-laden, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio.
Based on the trailing 12-month enterprise value to EBITDA (EV/EBITDA), the industry is currently trading at 7.58X compared with the S&P 500’s 19.13X and the sector’s 24.23X.
Over the past five years, the industry has traded as high as 12.6X, as low as 6.5X and at a median of 9X, as the chart below shows.
EV/EBITDA Ratio (Past Five Years)
2 Stocks to Buy
Geely: One of the leading automakers in China, Geely reported strong performance in the third quarter of 2025, marking a major milestone, as quarterly sales surpassed 1 million vehicles for the first time. Across its portfolio of brands—including Geely Auto, LYNK & CO, Zeekr, Volvo Cars, Polestar, PROTON, Lotus, smart, Radar, LEVC, and Farizon—the group sold 1,020,913 vehicles, up 28% year over year. Electrified vehicle sales (EVs, HEVs, and PHEVs) surged 59% to 588,110 units, accounting for 58% of total sales.
For the first nine months of 2025, cumulative sales reached 2.95 million units, up 29% from last year, with electrified models contributing over half of the total. The company’s diversified lineup and strength in intelligent, fuel-efficient, and electrified models continue to drive growth. Looking ahead, Geely plans to launch six new energy models in the coming months, while deepening synergies between Zeekr and Lynk & Co.
Geely currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for GELHY’s 2025 sales and earnings implies year-over-year growth of 94% and 4%, respectively. The Zacks Consensus Estimate for Geely’s 2026 sales and earnings implies year-over-year growth of 12% and 21%, respectively.
Price: GELHY
XPeng: Rising EV star of China continues to strengthen its position in the country’s competitive EV market with strong sales growth and a solid product portfolio. The company’s lineup spans sleek sedans, versatile SUVs and multi-purpose vehicles, including the sporty P7i sedan, coupe-style G6 SUV, roomy G9, and seven-seat X9 MPV. The budget-friendly MONA M03 targets value-conscious customers, while the P7+ and the new G7 crossover cater to families seeking a blend of performance and comfort.
After delivering over 190,000 vehicles in 2024—a 34% year-over-year increase—XPeng’s momentum accelerated sharply in 2025. The company delivered 94,008 vehicles in the first quarter, up 331% year over year, followed by another record-breaking 103,181 units in the second quarter. Third-quarter deliveries surged 149% to 116,007 units. XPeng’s technological edge is anchored by its AI-powered Hawkeye Vision System and XOS 5.4 software, which enhance its smart driving capabilities. Beyond vehicles, XPeng is investing in future technologies like flying cars and humanoid robots, underscoring its ambitions to redefine mobility.
XPeng currently carries a Zacks Rank #2. The Zacks Consensus Estimate for XPEV’s 2025 sales and bottom line implies year-over-year improvement of 97% and 74%, respectively. The Zacks Consensus Estimate for XPeng’s 2026 sales and bottom line implies year-over-year improvement of 34% and 233%, respectively.
Image: Bigstock
2 Foreign Auto Stocks Powering Ahead in a Downbeat Industry
The Zacks Automotive – Foreign industry reflects a mix of opportunity and caution as regional markets navigate different growth trajectories. China continues to dominate with strong domestic demand and rapid electrification, supported by government incentives and trade-in programs. Europe’s automakers, however, remain under strain, juggling tariffs, regulatory costs, and fierce Chinese competition even as sales show tentative recovery. Japan’s market is losing momentum, with consumers favoring hybrids over fully electric models, reflecting a slower path to full electrification. Meanwhile, India stands out for its steady retail growth, policy-driven reforms, and expanding EV transition. Given the industry dynamics, a few stocks like Geely Automobile Holdings Limited (GELHY - Free Report) and XPeng Inc. (XPEV - Free Report) make for smart investment choices now.
Industry Overview
Companies in the Zacks Automotive – Foreign industry are involved in designing, manufacturing and selling vehicles, components, as well as production systems. The foreign automotive industry is highly dependent on business cycles and economic conditions. China, Japan, Germany and India are some of the key foreign automotive manufacturing countries. The widespread usage of technology is resulting in the fundamental restructuring of the market. Stricter emission and fuel-economy targets and ramp-up of charging infrastructure, as well as supportive government policies, are boosting sales of green vehicles. With almost all firms intensifying their electrification game, competition is getting tougher with each passing day. Foreign automakers are now actively engaged in the R&D of electric and autonomous vehicles, fuel efficiency and low-emission technologies.
Key Investing Themes
China’s Auto Market Powers Ahead: China’s auto market continues to expand steadily, supported by strong domestic demand and sustained government incentives. Years of subsidies and policy support have positioned China as the world’s largest electric vehicle EV market. According to the China Passenger Car Association, domestic car sales rose 6.6% year over year to 2.27 million units in September 2025, following a 4.9% increase in August. Sales of electric and hybrid vehicles accounted for 57.2% of total sales, up 15.5% from a year earlier. The China Association of Automotive Manufacturers projects total vehicle sales to reach 32.3 million units in 2025, about 3% higher than 2024, with new energy vehicle sales expected to jump 20% to 15.5 million units. Supported by trade-in incentives and robust economic activity, China’s auto market remains on a firm growth path, driven by accelerating electrification and resilient consumer demand.
Europe’s Auto Industry at Crossroads: Europe’s auto industry is navigating a challenging environment marked by trade tensions, competitive pressure and the costly shift to electrification. The sector remains squeezed by U.S. tariffs, strong competition from Chinese automakers, and strict EU regulations on electric vehicle adoption. Despite these headwinds, there are signs of stabilization. According to European Automobile Manufacturers’ Association, new car registrations in the EU rose 0.9% year to date through September 2025, following a 2.4% decline in the first half of the year. September alone saw a robust 10% jump, helped by the launch of new models, marking the third straight month of growth. However, battery-electric vehicles held a steady 16.1% share—below the pace needed for the region’s green transition. Overall, while recent momentum suggests recovery, Europe’s automakers still face an uphill battle to balance competitiveness, affordability and sustainability in an increasingly crowded global market.
Japan’s Car Industry Slows Its Pace: Japan’s auto market has shown moderate growth in 2025, but signs of cooling are emerging. According to Focus2Move.com, year-to-date car sales through September rose 5.1% from a year earlier, though monthly volumes have declined for three straight months, signaling a slowdown in momentum. Japan’s EV segment continues to lag, with sales down 11.9% through August and accounting for just 2% of total car sales. Despite government incentives, consumer demand for fully electric vehicles remains limited, as buyers continue to favor hybrids. Japan’s cautious approach to electrification reflects limited EV supply chain investment and energy security concerns. With both the government and automakers prioritizing hybrid and hydrogen technologies, the country’s transition to full battery electrification is expected to remain gradual compared with other major markets.
India’s Auto Sector Gains Traction: Per Hindustan Times, India’s auto retail sector maintained steady growth in the first half of FY26 (April–September 2025), with total vehicle registrations rising 3.4% year over year. The outlook remains positive as structural reforms and shifting consumer trends reshape its trajectory. The implementation of the GST 2.0 reform has recalibrated automobile taxation, reducing the rate on small cars from 28% to 18%. This move is expected to make affordable vehicles more accessible to India’s growing middle class, supporting demand in the mass-market segment. Meanwhile, the country’s accelerated transition toward electric mobility is further redefining its automotive landscape. Overall, industry participants remain optimistic that policy support, rising affordability, and evolving consumer preferences will sustain growth in the coming quarters despite global headwinds.
Zacks Industry Rank is Discouraging
The Zacks Automotive – Foreign industry within the broader Zacks Auto-Tires-Trucks sector currently carries a Zacks Industry Rank #204, which places it in the bottom 16% of around 245 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Over the past year, the industry’s earnings estimates for 2025 have moved 37.5% south. Estimates for 2026 have also been revised downward by 34.8% over the same timeframe.
Still, we will present a few stocks that are worth adding to your portfolio. But before that, let’s look at the industry’s recent stock market performance and current valuation.
Industry Lags Sector and S&P 500
The Zacks Automotive – Foreign industry has underperformed the Auto, Tires and Truck sector and the Zacks S&P 500 composite over the past year. The industry has risen 11% compared with the S&P 500 and the sector’s growth of roughly 20% and 41%, respectively.
One-Year Price Performance
Industry's Current Valuation
Since automotive companies are debt-laden, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio.
Based on the trailing 12-month enterprise value to EBITDA (EV/EBITDA), the industry is currently trading at 7.58X compared with the S&P 500’s 19.13X and the sector’s 24.23X.
Over the past five years, the industry has traded as high as 12.6X, as low as 6.5X and at a median of 9X, as the chart below shows.
EV/EBITDA Ratio (Past Five Years)
2 Stocks to Buy
Geely: One of the leading automakers in China, Geely reported strong performance in the third quarter of 2025, marking a major milestone, as quarterly sales surpassed 1 million vehicles for the first time. Across its portfolio of brands—including Geely Auto, LYNK & CO, Zeekr, Volvo Cars, Polestar, PROTON, Lotus, smart, Radar, LEVC, and Farizon—the group sold 1,020,913 vehicles, up 28% year over year. Electrified vehicle sales (EVs, HEVs, and PHEVs) surged 59% to 588,110 units, accounting for 58% of total sales.
For the first nine months of 2025, cumulative sales reached 2.95 million units, up 29% from last year, with electrified models contributing over half of the total. The company’s diversified lineup and strength in intelligent, fuel-efficient, and electrified models continue to drive growth. Looking ahead, Geely plans to launch six new energy models in the coming months, while deepening synergies between Zeekr and Lynk & Co.
Geely currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for GELHY’s 2025 sales and earnings implies year-over-year growth of 94% and 4%, respectively. The Zacks Consensus Estimate for Geely’s 2026 sales and earnings implies year-over-year growth of 12% and 21%, respectively.
Price: GELHY
XPeng: Rising EV star of China continues to strengthen its position in the country’s competitive EV market with strong sales growth and a solid product portfolio. The company’s lineup spans sleek sedans, versatile SUVs and multi-purpose vehicles, including the sporty P7i sedan, coupe-style G6 SUV, roomy G9, and seven-seat X9 MPV. The budget-friendly MONA M03 targets value-conscious customers, while the P7+ and the new G7 crossover cater to families seeking a blend of performance and comfort.
After delivering over 190,000 vehicles in 2024—a 34% year-over-year increase—XPeng’s momentum accelerated sharply in 2025. The company delivered 94,008 vehicles in the first quarter, up 331% year over year, followed by another record-breaking 103,181 units in the second quarter. Third-quarter deliveries surged 149% to 116,007 units. XPeng’s technological edge is anchored by its AI-powered Hawkeye Vision System and XOS 5.4 software, which enhance its smart driving capabilities. Beyond vehicles, XPeng is investing in future technologies like flying cars and humanoid robots, underscoring its ambitions to redefine mobility.
XPeng currently carries a Zacks Rank #2. The Zacks Consensus Estimate for XPEV’s 2025 sales and bottom line implies year-over-year improvement of 97% and 74%, respectively. The Zacks Consensus Estimate for XPeng’s 2026 sales and bottom line implies year-over-year improvement of 34% and 233%, respectively.
Price & Consensus: XPEV
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.