Automotive recession plays

Before I type out this undoubtedly long winded but well thought out thread. PSA start reading the forums post and contribute to them there are a lot of really bright minds on tf everyday that have good info but it gets lost in the shuffle and stop playing 0DTE SPY contracts I’m a choppy ass market that goes up with bad news and down with good news. And sometimes we have no idea which way the news makes it go. Or as The House says JPow craps his diaper and market moves. There are so many 100-1000 percent plays or even more I couldn’t even list them all. I typically try to focus on premarket when I figure out what I’m going to trade. I purposely look for a ticker that is moving the opposite direction of SPY if it has strength or weakness and SPY ends up moving the same direction it’s simply more cocaine up the nose of that ticker. To that side. As noted today one simple tank of a large size ticker in SPY can ruin your whole day as @rexxxar noted in his SPY thread. If we get a Green Day I look for something that had been beat down lately without reason this week traded LULU in that regard because it got clipped Friday on NKE earnings well it was green market had more room to recover. Same goes with now I will watch KMX AMC CVNA type tickers that have moved up for no reason for puts on red days.

Now onto what this post is really about. Targeting automotive tickers for recessionary climate plays. Put these on your watch list if interested watch them chart your supports resistances

Largely the automotive industry is relatively slowdown resistant. People need cars have to have them serviced need parts etc. so I’m going to break this down in several categories. New car dealers used car dealers. Legacy manufactures and EV manufacturers.

1:) Let’s start with EVs the darling of the industry. Tickers include


EVs are getting propped up currently with fuel prices at historically high levels and the federal governments push to go electric these largely should be pumping.

However heading towards a recessionary climate it takes something like 10 years to recoup the initial upfront cost.

3 of these 4 tickers are startups relatively speaking. The worst time for a startup…. Heading into a recession.

Whose gonna spend 100k on an EV when inflation is rampant. Rich people mostly. Well only so much demand for these when tightening happens.

2:) used car dealers tickers include

Used car values are at an all time high a couple year old used car many a times brings what it sold for new. Problem lies within acquisition costs. These two mega used dealers have been paying up to keep the parking spots filled. As I use the term we can’t sell concrete. But they have went to extraordinary levels. Here is why I am overly bearish on these guys.

High acquisition costs coupled with slow turn means ineventory in the water. It means you are buried in your merchandise. Both of these companies struggle to post a profit Even in the best of times the last two years have presented. CVNA is largely on the bubble of collapse and KMX as we know just got slaughtered last quarter before the real proverbial shit has hit the fan.

They also provide financing rising rates and defaults lead to less margins from this aspect and likely losses.

3:) new car dealers tickers include


These are the tough ones new car demand is heavily backlogged and in last couple years has become the cash cow of the dealer. 2 years ago the average gross per unit on a new car was less than 1000 per car. It’s now ballooned over 4000 this is all mostly due to supply vs demand. It will largely take a few more years for this to catch up.

However the bearish aspect. New cars keep getting more and more expensive. With rising rates this makes them unaffordable and pushes consumers towards late model used cars.

4:) Legacy brands IE manufacturers tickers include


For the most part these guys are still running strong large margins with overwhelming demand. However supply chain constraints and inability to further expand the pipeline along with rising costs for parts plus labor and shipping. Any decline in demand and some leveling of supply they start to feel the pain. Right now it’s build as many as they can as fast as they can and they are sold.

One problem with these are the old saying “pigs get fat hogs get slaughtered” the price increases on the New cars has out paced any kind of inflation you can think of. Eventually with the rising rates and rising cost they will price themselves out of the market in come factory based incentives and adverstising expense. When’s the last time you was a car ad while watching the football game it’s been awhile. This in turn leads to less revenue.

4:) @tedro asked good question so wanted to add luxury brands tickers include


These are high end luxury cars. This would be the last segment I’d expect to see a decline largely bought by people well off least affected by recessions or downturns. Many of these folks own business don’t pay interest etc. however if there is a recession or decline their revenue sources become affected as well. It just takes a bit longer to hit them as the everyday American. Any increase in shipping or import cost could have a negative affect here as well as they are largely built in Europe so keeping an eye on the evolving European economy is worth while here as well. If the US strives in a bubble they could still take a hit.

5:) adding a 5th segment here Chinese EV manufacturers that trade on the NYSE thanks @Shadowstars

I’d largely place these in the EV segment they will move with US EV stalwarts. However we really don’t know how soon the Chinese market could collapse as there is the outstanding evergrande issue going on there and the strength of their banks or financial system are relatively unknown these could tumble first if they do I’d look to play them as well as the US EV segment.
Lastly I want to caution the prevailing thoughts that this is some inevitable crash. This segment may not it has a huge back log of demand and still has supply problems. How can we monitor this ? I will certainly keep everyone informed of the situation in the real world auto market but these can be geographical essentially what is still rolling here might not be on the west coast etc. we need to watch for our local dealers lots beginning to fill up if the same blue truck has been sitting in front row for weeks etc. watch for downturns Used car values and so on.

The Auto sector could largely be behind the curve on any kind of burst we see and may need some largely scale catalyst such as some banking turmoil some kind of further supply chain disruption further increase in gas prices

Please contribute to this thread and let’s try to stay ahead of this and all make some money.


What are your thoughts on luxury brands? I don’t know many but I’ve played RACE (Ferrari) occasionally. It’s slow moving but has some big movements from time to time.


I’d put them in the same boat as EV high end segment largely expensive and frankly if we hit a recession or admit we are most that can afford something along those lines will eventually be affected as well. Likely the last to be hit. If you got FU money it’s going to last a lot longer than Joe Blow trying to buy a 15k dollar used car at 8 percent interest.


This would be a good play though as it should largely move with the tickers mentioned in the Legacy brands above. I’m going to add it to my watchlist to see if it does. Higher dollar ticker than most so could get some better returns.

1 Like

I’m curious if there is any tie in with Car Rental companies, while not manufactures they end up selling their used vehicles. CAR & HTZ should have their earnings by end of October, I think I brought this up on TF before and someone had mentioned they overpaid for their inventory, if they can’t unload at used car bubble prices, then I would think that would hurt their bottom line, all this isn’t in consideration of higher gas prices and recession pressures on vacations too.

1 Like

Rentals are tough ones. A lot of times what they do is if they overpay for cars they just keep them in rental service longer. It really doesn’t take long at 50 dollars a day 7 days a week a car is rented out to offset some water in their inventory. So you will notice a rental car with 40 50k miles. When I’m normal times they turn them out with 10 or so.

You are probably in the right track where it would most likely be a decline in families not taking vacations.

Have y’all thought about the parts side of automotive?

While AAP is down for the year, GPC and AZO are up.

I work with independent/semi-independent auto parts stores in different areas of the US that use GPC as their main supplier, doing their accounting and the like. Lot of 'em are pretty chatty about their general feelings on things and typically have 10-20 years in the business. One was a GM at GPC during 08 and isn’t worried about a recession far as keeping his stores running.

A short overview is that August was a record sales month for most of these stores and Sept is seeing a slight decline. Winter months usually have the lowest sales since DIYers would rather not fuck around in the cold and snow to fix their shit, summer cars get put away, etc.
However, sales are still higher across the board than they were in 2021 with commercial sales seeing a slight uptick and DIY sales making up the bulk of the increase.

We’re also seeing inventory values start to decline again after a lot of clients saw their inventories increase 10%+ in value from increasing steel prices and such during late 2021 through summer 2022.


Aap over azo as worldpac is far superior to imc. I have not been following the stocks, but I spend 10k-month with worldpac who is owned by aap

1 Like

Following this.
Great thread, bud! You have to be a Legend!


I’d highly expect that any kind of downturn in the retail sector would in turn be bullish for Automotive parts segment.

If people aren’t upgrading they will likely be fixing theirs. Many dealers acquire older car parts from these stores as well. So if the service departments are knocking business out. The parts providers would benefit.

1 Like

I’ll continue to update info as available and we progress. I got no wings in the forums I see. Busting me out

As a comparative marker, don’t forget that Porsche just IPO’d off of VW last week since their newest EVs are being hailed as true competition for Tesla. Their share price has already fallen below their initial IPO price.

1 Like

I would also add some of the Chinese EVs such as NIO, XPEV and maybe LI.

I would classify them not quite “start up” since they are pushing out a decent amount. (Roughly 10k vehicles per month).

I plan on digging into the chinese EVs a bit more especially due to their current price levels vs what they IPO’d at but nonetheless they should be looked at.

Also if looking at strictly “US” EVs, I would also add Fisker (FSR).

1 Like

Good point. Chinas economic standpoint is always hard to gauge since they keep everything so close the chest. But if American EVs fall these will as well. I literally have zero idea what any of these cost or starting price points.

Fisker is a good one too. Thought I had everything. Thanks appreciate it!

Forgot this one as well. Was hoping you’d jump in this thread. Your expertise is always appreciated. Porsche maybe a good one on the luxury side too along with segment

1 Like

Added a 5th section for Chinese EV tickers to the original thread. Thanks for the reminder

If we are going to talk auto parts, I think a nice one at the current price point is LKQ. Where retail stores fail with supply at times, typically LKQ is there to fill in. Remember that we are in tough financial times so if people can save money buying used parts over new, they’ll go that route. They were also right there along with dealers buying up inventory at auction at inflated prices, but will easily make their money back in parting out the vehicles rather than selling the entire vehicle like a dealer would. If Pull-A-Part ever goes public, I’m going in balls deep.

Sadly unlike old times also where used dealers, retail parts stores, and junk yards dominated, social media has given people so much access to each other that buying a car or used part direct from an individual has never been easier.


Could see some decent price movement on Polestar next Wednesday Oct. 12th. They are unveiling a new vehicle model.

1 Like

Just a good piece of information on automotive sales in 2022. As Earnings are reported in arrears, we may want to look at the lackluster sales in the late sprint/early summer.

  • AN is expected to report earnings on 10/27/2022
  • LAD is expected to report earnings on 10/19/2022
  • PAG is expected to report earnings on 10/26/2022

To say that all of these are on the downtrend is a bit of an understatement. As this information that I posted is publicly available, I think we have a couple things to think about running up to earnings:

  • Have the markets overreacted to these car sales companies?
  • Will earnings be poor, but better than expected and send them back up?
  • Will we continue to trend down into earnings?

As I’m looking at the charts, each of the tickers are correlated to SPY to some extent, however it doesn’t seem to be precisely comparable against the three. If I had to rank from most to least SPY correlated (based on % change):

  1. PAG
  2. LAD
  3. AN

A point of interest is that as PAG has been the most SPY correlated, it’s the ticker that has had the least dramatic drops. AN and LAD have losses that have outpaced SPY at points, but PAG has been pretty heavily correlated. From my perspective, understanding the headwinds of the automotive industry as a whole, understanding that the earnings reported will be for months that we already know lag behind 2021 sales, I would be of the mind that PAG has the most to lose over the coming weeks when their earnings drop.

Conversely, because LAD has suffered the biggest losses outside of SPY itself, it may have the most upside. I would personally not be playing to the upside of the automotive industry at the moment, but it could end up being an overreaction from the markets.

Either way, three earnings with heavy sympathy amongst each other and not being above the influence of the broad market may create some juicy opportunities after LAD reports on the 19th. If LAD reports well or the market decides that it has overreacted and the market happens to be in an uptrend, I think PAG specifically could have the farthest to fall pending their earnings.

1 Like

united-states-automotive-aftermarket-148165.pdf (1.0 MB)

An interesting point and something to consider is the aftermarkets market for sure. In MarketLine data we can see that we’re expecting growth in the sector to GREATLY outpace automotive manufacturing in the same timeframe. Automotive Manufacturing (for new vehicles) is expected to plateau by 2026 at 2.8% growth per year, whereas aftermarkets are expected to plateau in that same timeframe closer to 5% per year.

I do have unfettered access to this type of research data so please let me know if there’s anything in particular about an industry you’d like to see.

1 Like