Volkswagen vs. Toyota: Which Auto Giant is a Better Buy?

© Reuters. Volkswagen vs. Toyota: Which Auto Giant is a Better Buy?

With the increasing demand for carbon-neutral vehicles and a gradual lessening of the global semiconductor shortage, the automotive industry is expected to witness a solid recovery. So, shares of auto giants Volkswagen AG (OTC:VWAGY) and Toyota Motor Corporation (NYSE:TM) should benefit. But which of these two stocks is a better buy now? Read more to find out.Volkswagen (DE:VOWG_p) AG (VWAGY) manufactures and sells automobiles primarily in Europe, North America, South America, and the Asia-Pacific. The Wolfsburg, Germany-based company operates in four segments: Passenger Cars and Light Commercial Vehicles; Commercial Vehicles; Power Engineering; and Financial Services. In comparison, Japan’s Toyota Motor Corporation (TM) designs, manufactures, assembles, and sells passenger vehicles, minivans and commercial vehicles, and related parts and accessories. It operates in Automotive; Financial Services; and All Other segments.

The global semiconductor shortage, supply chain crisis, and labor shortages have wreaked havoc on the auto manufacturing industry. However, massive government and private investments to boost semiconductor production should gradually ease the problem and help auto manufacturers boost production. Furthermore, the rising demand for electric vehicles (EVs) due to rising oil prices and climate change concerns should drive the industry’s growth. In addition, traditional automakers might benefit more than specialist EV manufacturers because of their broad portfolio of cars and market dominance. According to a report by Market Research Future, the automotive industry is expected to grow at a 4.5% CAGR between 2021 -2028. Therefore, both VWAGY and TM should benefit.

TM stock has gained 4.1% in price over the past month, while VWAGY has returned 1%. However, VWAGY’s 49.9% gains year-to-date are significantly higher than TM’s 20.3% returns. Moreover, VWAGY is the clear winner with 62.2% gains versus TM’s 32% returns in terms of the past year’s performance.

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