Investors Should Stop Overlooking the World's Top 3 Auto Stocks

The narrative surrounding the automotive industry hasn't always been a great one for investors. The industry is known for being brutally competitive, highly capital-intensive, unpredictable, and cyclical. And worse than anything, it's known for razor-thin margins.

That said, those narratives are changing as vehicles and the industry evolve toward more technologically advanced automobiles, including autonomous driving technology and other high-margin services. The following three stocks have all thrived in their own unique ways and are poised to beat the market going forward.

Ferrari's first full EV played a role in its lower stock price, which is an opportunity for investors. Image source: Ferrari.

Ferrari

Ferrari (NYSE: RACE) is a unicorn in the sense that it flips nearly all traditional automotive industry stereotypes on their head. Not only does Wall Street see the stock -- and value it -- more as a luxury brand than a traditional automaker, but Ferrari also earns its historically lofty valuation in multiple ways. First, as you can see in the graphic below, it boasts gross margins above 50%, like many luxury stocks, and dwarfs those of competitors.

RACE Gross Profit Margin data by YCharts.

Ferrari's EBITDA (earnings before interest, taxes, depreciation, and amortization) and operating margins are also 2 to 3 times higher than most of its competitors and are consistently rising. This emphasizes the company's ability to hold durable competitive advantages in an industry not known for having economic moats.

Another aspect of the automotive industry that Ferrari flips on its head is its resistance to economic downturns and cyclicity. That's driven by two factors: Ferrari's strict exclusivity and hyper-wealthy consumer base.

Because Ferrari limits the volume of production well below demand, there are always consumers lining up to buy a vehicle when the opportunity presents itself, regardless of the economic situation. That factor is only amplified by the fact that the ultra-wealthy consumer base is far more insulated from traditional economic downturns, changes in interest rates, and other factors.

Currently, Ferrari isn't cheap by automotive industry standards, but its valuation is cheaper than its average over the past five years. That's in part because of internet backlash about the design of its first fully electric vehicle (EV), the Luce -- but it's going to sell out anyway, and over 40% of Ferrari's shipments in 2025 were hybrids. Ferrari is built more for the future than people give it credit for, and it's been winning for a long time.

BYD

BYD (OTC: BYDDY) (OTC: BYDDF) is another global automaker juggernaut, only in ways different from Ferrari. BYD switched to selling only EVs years ago and has watched its reach expand globally and sales volume soar, even passing Tesla in global EV sales last year. It wasn't even particularly close, with BYD selling 2.26 million full EVs to Tesla's 1.64 million. And when you include plug-in hybrids, that number from BYD jumps to 4.6 million vehicles.

One big reason for BYD's success is its ability to undercut the competition on price without sacrificing its vehicle quality or advanced EV technology. BYD is able to keep its costs impressively low through its unparalleled vertical integration and growing scale. It manufactures its own Blade batteries and semiconductors and generates large cost efficiencies that position it better than competitors amid price wars, which China's market is currently facing.

These are wildly affordable and well-designed vehicles, and BYD's sales are surging overseas in Latin America, Southeast Asia, and Europe. In fact, because of China's current price war and brutal competition, BYD's export business has turned from a nice surprise to a primary growth engine. As recently as June, the company's overseas sales jumped nearly 95% year over year to a record 175,349 vehicles in only one month. BYD's foreign markets now generate 43% of total sales, which helps offset a 22% domestic decline in China as subsidies and tax changes weigh on the market.

BYD is thriving globally, and when the Chinese market turns around, perhaps after some much-needed consolidation, it will be as well positioned as ever to profit for its investors.

General Motors

A big advantage for General Motors (NYSE: GM) is its co-dominance in full-size internal combustion engine trucks and SUVs -- a dominance it shares with crosstown rival Ford Motor Company. These full-size trucks and SUVs cost only marginally more to produce than sedans and carry far higher price tags and much fatter margins. That's why Ford went so far as to end production of all sedans in the U.S. market, other than its iconic Mustang. But keep in mind that the Mustang Mach-E even outsells the traditional internal combusion version.

While Ford is also well-known for its lucrative dividend that often yields between 4% and 5%, General Motors takes a different approach to its rival: share buybacks. For years, while GM's price-to-earnings ratio traded in the single digits, the company spent tens of billions of dollars to buy back an enormous number of shares. The market finally caught on toward the end of 2025, pushing its valuation roughly 3 times higher.

GM PE Ratio data by YCharts. PE Ratio = price-to-earnings ratio.

GM also has its eye on the future, expanding its high-margin -- think tech company margins -- OnStar and Super Cruise products and services. GM is playing the long game with this strategy and is giving every new GM vehicle eight years of basic OnStar and, in vehicles with the capability, three years of Super Cruise. GM is embedding these long-term subscription packages, hoping to drive renewal rates of these high-margin services higher. Early signs are positive, as the attach rate has consistently landed in the 30% to 40% range after the initial prepaid period ends.

Top global autos

These three automakers are all global juggernauts in their own way. Whether you prefer the pricing and brand power of Ferrari, BYD's intense vertical integration and low cost efficiencies, or GM returning massive value to shareholders through buybacks, they are all positioned to continue doing exactly what made them top, unique automotive stocks going forward.

Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool has positions in and recommends Ferrari and Tesla. The Motley Fool recommends BYD Company and General Motors. The Motley Fool has a disclosure policy.