Google Trends: Automotive Edition

Includes: F, GM, TM, TSLA
by: User48601

This is the first in a series of articles based on Google (NASDAQ:GOOG) Trends. Google Trends provides a wealth of information that can be sorted by time or region, and that data can be a powerful predictor of market trends. For example, one academic paper found that a trading strategy which focused on the Google Trends' word 'debt' as a predictor provided a 326% return over seven years, whereas a buy-and-hold strategy managed only a 16% appreciation.

Today we apply Google Trends to vehicles from Ford (NYSE:F), Toyota (NYSE:TM), and Tesla Motors (NASDAQ:TSLA) and we draw some interesting conclusions. Namely:

  1. Sporty is out, fuel economy is in.
  2. Interest in the Tesla Model S took off like a rocket ship, but it has been waning since the latter half of 2013.
  3. Worldwide interest in Tesla Motors is large, especially in (surprise!) Norway, Slovenia, the Czech Republic, and Russia.

As you look at these charts, keep in mind that the y-axis ranges from 0 to 100. 100 indicates the peak popularity of the search term, and the rest of the data is normalized with respect to the peak.

"Ford Focus" - The Focus was the world's best-selling nameplate in 2012 and 2013. Here we see that search volume for "Ford Focus" has been steady over the past nine years.

"Focus mpg" - Consumers did not give a hoot about fuel economy prior to 2005. Since then, miles per gallon has become much more important.

"Focus 0-60" - The 0-60mph time measures a car's acceleration. It seems that consumers today care no more about a 'sporty' Ford Focus than they did in 2006. The spike in 2004 puzzles me.

"Focus Price" - Price has become a larger concern to Focus searchers of late. Interestingly, it did not become a significant concern until the recession of 2007-2009 had passed.

"Toyota Tundra" - To mix things up, I'm also looking at a vehicle which is quite distinct from a Ford Focus. This is a large pickup which is manufactured in Texas and sold by a Japanese company. A new model was released in 2007, hence the spike in that year.

"Tundra mpg" - As with the Focus, we see that consumers are definitely more conscious of gas mileage in 2014. They were not concerned with fuel economy prior to 2006.

"Tundra 0-60" - Acceleration is not a selling point for the Tundra anymore.

"Tesla Model S" - Tesla Motors is an upstart company which is redefining the auto market. Searches for "Tesla Model S" grew exponentially into 2013, but they have waned of late. Perhaps winter weather was to blame? Or maybe the company's sole model is growing a bit stale?

"Model S price" - Price, reliability, and other search modifiers do not yield additional insight; they generally follow the larger trend of "Tesla Model S" searches.

"Model S safety" - This plot is interesting because there were three Model S fires in late 2013. It appears that many consumers turned to Google to form their own opinion about Model S safety. I consider this to be a boon for the stock, as the Model S's safety record has been great overall. The top three results for a Google search of "Model S safety" are:

  1. Tesla Model S best car of 2014: Consumer Reports
  2. Does the Tesla Model S deserve to wear Consumer Reports' crown?
  3. Tesla named the top pick of Consumer Reports

All three headlines are bullish.

Geographical interest in Tesla Motors

"Tesla Motors", 2007. - In 2007, only one country in the world was interested in Tesla Motors, and that was the United States.

"Tesla Motors", 2014.

Seven years later, much of the world is interested in the Model S. The US still leads in terms of search volume. Consumers in Slovenia (73) and the Czech Republic (57) are also searching for Tesla Motors - perhaps because the company's namesake was born in the region? Interest is also strong in Norway and much of Europe - which makes sense, because the car is sold in those regions.

Perhaps Elon Musk should open showrooms in India (16), Russia (23), Argentina (17), or Chile (20)? The relatively heavy interest in such populous countries bodes well for future Tesla demand. Two countries which show surprisingly little interest are Japan (6) and China (0). Tesla has a showroom in Hong Kong which gathered a strong number of pre-orders, but it's safe to say, the average Chinese citizen has not heard of the company.

Direct Comparison of "Ford Focus", "Tesla Model S", and "Toyota Tundra"

Finally, a direct comparison of search volume. The world's number one nameplate (the Focus) has always garnered more internet attention than the Model S. However, interest in the Model S far outstrips that of its competitor (the Nissan Leaf) and is on a similar level with the Toyota Tundra. Toyota sells about 9,000 Tundras per month, while Tesla only moves about 2,000 Model S per month. Clearly there is more buzz surrounding the Model S than the average vehicle.

How should this affect my capital distribution?

First, if I held Tesla stock, I would be concerned about the waning buzz over the Model S. It looks like this car model is becoming stale, and it's a good thing that Tesla will soon rejuvenate its lineup with the Model X. I'm not a buyer unless TSLA hits $150 or less.

As internal combustion engines go, there is a definitive trend towards fuel efficiency. I like Ford Motor Company because its next-generation F150 will be vastly more fuel-efficient than the outgoing model. General Motors (NYSE:GM) will not come out with a competitive truck until 2018. The Tundra's time is almost done, as it receives a measly 13.8mpg in real-world driving. Toyota is expected to re-engineer a new model soon. I tend to focus on pickup trucks because those are the most profitable models of Ford and GM.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.