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The car industry is turning to technology

The automotive sector is in full swing between possible corporate movements and the crossfire of the ‘commercial war’

MADRID. The eurozone’s economic confidence continues to decline, and Germany appears to be particularly affected by the global slowdown, particularly its automobile industry, which has experienced a dramatic slowdown in recent months.

The sales volumes of automobiles in the united States and Western Europe are already at high levels, which limits the growth of the manufacturers. China has been the engine of growth over the past decade, but experienced a sudden drop in demand in the second half of 2018, which has not recovered so far.

The car industry is also experiencing a shift towards technology. Electric vehicles will become increasingly important. Investment in research and development and increased production of electric vehicles will result in increased costs and limited potential for margin expansion.

In this difficult environment, it is becoming increasingly important for investors to focus on stock selection and the fundamental analysis of each company. We currently prefer supplier companies for the automotive industry that benefit from future trends, such as electrification or self-driving. One of our investments is, for example, the German family company Hella. This company has already allocated substantial funds in research and development and is currently benefiting from the growing demand for future-oriented products, such as battery management systems or DC-DC converters.

Dominicus Alexander is manager of MainFirst Germany Fund

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