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Want to invest in the car industry? Here are some ideas

The car industry is a large part of the Australian economy. It makes up a big part of the Australian workforce, it pays for a lot of advertising and sponsorships and it’s very profitable.

According to the 2015 Motor Vehicle Census there were 18 million vehicles in Australia in 2015, of which 16 million were cars and light commercial vehicles. That’s almost one car for every single adult in Australia.

So, what are some ways to get exposure to this large industry? It’s not as though Toyota or Ford trade on the ASX.

One option is Caltex Australia Limited (ASX: CTX). We like to complain about petrol prices all the time, so why not own a piece of the company making a lot of the profit? Things are going well in the servo industry, with margins supposedly close to their all time highs. Caltex is currently trading at 13x FY18’s estimated earnings.

Perhaps you believe that petrol-powered cars are going the way of the dinosaur and will be extinct sooner than you think. In that case lithium stocks could be the way to go as batteries become the norm with electric vehicles, meaning Galaxy Resources Limited (ASX: GXY), Pilbara Minerals Ltd (ASX: PLS) and Orocobre Limited (ASX: ORE) could be better value after their price falls in recent months.

The most obvious way to get into the car industry is car dealerships. Automotive Holdings Group Ltd (ASX: AHG) and AP Eagers Ltd (ASX: APE) are two of the biggest dealership companies on the ASX and they have impressive profit histories.

ARB Corporation Limited (ASX: ARB) is a good proxy for the car industry with its four wheel drive equipment and accessories.

A left field choice could be Smart Parking Limited (ASX: SPZ) which is a leader in the design, development and management of parking technology.

Foolish takeaway

Sometimes diversifying into a different industry can be a good move for your portfolio if you’re too focused on one area, such as banks or healthcare. The car industry could drive your portfolio higher.

Perhaps the best car stock of all is this top auto company which is expected to grow profit by more than 30% in this financial year, that's why it's already in my portfolio.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended ARB Limited and Automotive Holdings Group 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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