Tap Into a Massive Auto Parts Market with China Automotive Systems

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Momentum in the Chinese electric vehicle market should steer CAAS stock traders in the right direction

If you’d like to consider a company that supplies essential parts to a huge market, then take a look at China Automotive Systems (NASDAQ:CAAS). This firm is an automotive systems and components manufacturer and seller which — as the name implies — is based in China. Because it’s not a giant company, however, some American traders aren’t familiar with CAAS stock.

A stack of auto parts

Source: Shutterstock

For one, a market capitalization of around $192 million suggests that it has room to grow. China Automotive Systems is a niche-oriented yet also fairly diversified company, specializing in “a full range of auto parts incorporated into steering systems for both passenger automobiles and commercial vehicles.”

But, as an informed investor, it’s important to determine whether the company is on the right track. Analyzing the available data will guide us in deciding whether China Automotive Systems is poised for expansion.

If it is, CAAS stock could represent a ripe opportunity for investors — this little-known name could be a surprise market runner in 2021.

CAAS Stock at a Glance

Throughout its history, CAAS stock has been known for sharp price spikes. The bulls quickly pushed the share price above $10 in 2003, 2004, 2006, 2010 and November of this year.

The 2010 price spike in CAAS stock was particularly powerful as it topped out at the $23 level. That price could be a target for the bulls in the future. For the time being, though, there are other milestones to achieve along the way.

In 2020, the bulls pushed the stock to a 52-week high of $13.69. However, by Dec. 21, that price was cut in half. That wasn’t great news for folks who already owned the shares, but at least prospective investors could get in at a lower price point.

That said, in the final stretch of 2020, CAAS seems to be stabilizing. From Dec. 15 through Dec. 23, the share price hovered between $6.50 and $7. So, are there reasons to believe that the bull thesis holds true for CAAS?

A Historical High

Holders of CAAS stock should be glad to know that the company reports some impressive stats for its size. For example, it offers four different series and over 300 models of power steering. It also owns three trademarks “covering automobile parts and 190+ Chinese patents covering power steering technology.”

The most recent stats also indicate a business in strong growth mode. In November, the firm shipped “approximately 70,000 commercial vehicle steering systems to leading Chinese truck OEM producers and the North America aftermarket.”

That figure represents a “monthly historical high” for the company. In addition, the company projects that its newfound sales rate of 70,000 units will continue into the first quarter of next year. This all suggests that CAAS is moving in the right direction.

Progress in the Electric Vehicle Market

CEO Qizhou Wu has noted that the company’s steering production lines “are running at nearly full capacity with two shifts.” So, obviously, the assembly line is working hard. We can also conclude that the market is treating China Automotive Systems quite well.

But CAAS stock could also poise itself for more growth by getting in on the red-hot electric vehicle (EV) market. Leveraging this market would certainly be advantageous.

Recently released data indicates that the company is, in fact, addressing this important market. So far in 2020, it has shipped 120,000 steering units for electric vehicles.

Additionally, the company projects that this figure may exceed 140,000 units by the year’s end. And 2021 could be even better — China Automotive Systems is pushing for sales of more than 200,000 steering units for Chinese EVs next year.

The Takeaway

So, clearly this firm is making significant headway in its specific niche. On top of its strong unit deliveries, leveraging the EV boom only adds value to CAAS stock and its investors.

Given these impressive numbers, I think we can expect to hear much more about China Automotive Systems in the future. Its assembly line — and the company itself — is running at full steam.

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