Here’s why automotive shares could boom post-COVID-19

Automotive shares listed on the ASX could be poised to boom post-COVID-19. The pandemic looks to fuel several positives for the industry. New automotive sales in Australia saw their worst month on record in April, plunging more than 48.5% for the month. The sharp fall in sales marked 25 consecutive months of falling sales in the industry.

Despite the doom and gloom, the coronavirus pandemic could see new automotive sales boom in 2020 and beyond. A recent newsletter from Auscap Asset Management highlighted the concerns of many public transport commuters. With difficulty in maintaining social distancing and the risk of being in contact with asymptomatic people using public transport, consumers may seek alternative transport.

Here are 2 ASX automotive shares that could be poised to boom post-COVID-19.

AP Eagers Ltd (ASX: APE)

The AP Eagers share price tanked approximately 74% from late February to late March in response to the coronavirus pandemic. Since then, shares AP Eagers have bounced more than 175%.

The company released a trading update in late April informing shareholders that its dealerships remained in operation. As Australia’s oldest listed automotive retail group AP Eager remains operational after reducing its cost base and reshaping its business.

AP Eagers also informed the market that they secured $122 million in working capital, putting it in a dominant position over smaller competitors. AP Eagers could also capitalise on buying distressed dealerships with a potential change in consumer behaviour fuelling new car sales.

Carsales.com Ltd (ASX: CAR)

Carsales could also receive a post-COVID boost. The company has a strong balance sheet and operational metrics, in addition to international market exposure. In response to the coronavirus pandemic, Carsales implemented cost-saving initiatives to mitigate financial impact and reduced market activity.

Carsales also waived trade customer’s fixed and variable advertising fees through April, reducing dealer’s short-term operating costs. In response, the Carsales share price has bounced more than 73% from its lows in March.

Foolish takeaway

The coronavirus pandemic will surely change certain consumer behaviours. Recent data from China has reflected growth in traffic levels and weak public transport after the country was released from lockdown. According to data from the China Association of Automobile Manufacturers, new car sales increased 4.4% year on year in April.

If Australian consumers adopt the same behaviour, we could see car sales receive a much-needed boost during 2020 and beyond. Additionally, with more traffic on Australian roads, auxiliary service operators like Transurban Group (ASX: TCL) could also be potential investment ideas for investors.  

More reading

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• Is the Transurban share price a buy today?
• 3 quality ASX dividend shares for income investors to buy today
• The one sector that could experience a V-shape COVID-19 recovery
• Which is the best ASX entertainment media share?

Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Transurban Group. The Motley Fool Australia has recommended carsales.com Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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