Volkswagen (VLKAY)

Volkwagen has a firm foothold in the Chinese market, which is one of the world's most rapidly growing markets, and is continuing to grow there. As of 2008, Volkswagen operates two joint ventures in China, which are respectively the 2nd and 3rd largest car manufacturers in China. This early dominance of the Chinese car market will serve Volkswagen well as incomes in China continue to rise and consumers demand ever more cars.

Volkswagen is investing heavily in its Audi Group and hopes to rival DAIMLERCHRYSLER AG (DCX) and BMW in the luxury car market. This growing focus on the upscale market is potentially advantageous for two reasons. First, margins on luxury vehicles are much higher than on normal cars, meaning Volkswagen earns more money on every luxury car sold. Second, luxury vehicle sales vary less with economic cycles, as wealthier buyers have a more reliable source of income.

Volkswagen is one of the top providers of diesel vehicles to North America. While diesel engines were traditionally spurned in North America due to their dirty exhaust, newer diesel technology makes these engines burn much cleaner, while still delivering diesel's considerably improved fuel economy. If fuel prices remain high in the long term, Volkswagen's head start with this technology will be advantageous as shoppers try to cut their fuel costs.