The automotive industry is at the highest risk of losing the most from the trade war. When Trump takes office, consumers need to worry about tariffs as high as 25%.
Last week, J.P. Morgan auto analysts met with executives in the auto sector. Most of them are expecting the Trump administration to either cut or reduce the Inflation Reduction Act. Throughout the last year, EV firms like Rivian Automotive (RIVN) and Lucid Motors (LCID) underperformed. Stock markets expect the government will not offer tax credits for EV buyers.
Without EV credits, Ford (F) and GM (GM) would face weaker sales. Both firms have already cut their ambitious EV goals, which required billions in investments and billions more in losses. Instead, they are looking up to Toyota Motors (TM). Toyota is betting on hybrids. It recently set a lofty return on investment target. TM stock rose from around $175 to as high as $200.
Tesla (TSLA) investors are not worried that the EV tax credit cancellation would hurt sales. Tesla’s margins may fall as sales weaken further. Although the firm risks reporting losses, it will not suffer as much as its competitors. Tesla has a healthy operating margin that its adversaries cannot match.
Tesla may continue its downtrend but is still in the best position among the automotive firms. It may ride out an economy full of tariffs.
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