Trump's presidency is good for traditional automakers, with Ford (F) and General Motors (GM) shares soaring.
Shares of Ford Motor (F.US) and General Motors (GM.US) rose sharply on Wednesday, largely due to Trump, tariffs, and taxes.
Ford's stock rose as high as 5.6% to $11.19 during midday trading, while the S&P 500 and the Dow Jones Industrial Average rose 2.4% and 3.4%, respectively. General Motors' stock rose as high as 3% to $54.
Trump's presidency and the Republican control of the Senate and House of Representatives will benefit traditional automakers in multiple ways.
First, Trump has always been lukewarm on electric vehicles, and he may try to eliminate the EV tax credit. This would slow the growth of the U.S. EV market. Since Ford and GM have not yet made money selling EVs, selling fewer EVs and more ICEs would be better for their product mix.
Tesla, which only sells EVs, also saw its stock rise 14.5% to $288 on Wednesday. However, Tesla sells EVs globally and has the scale to make money without the tax credit. Moreover, Tesla CEO Elon Musk supported Trump's presidential campaign, which is not a bad thing for the company.
Analyst Ben Kallo of Baird noted in a Wednesday report that not all of Biden's EV policies will change. He said that some policies that encourage battery factory construction are beneficial to both blue and red states. Nevertheless, Trump's stance on EVs had a negative impact. Rivian's stock fell 8.3%.
Moreover, Trump's tariff and tax policies may also benefit Tesla, General Motors, and Ford.
Trump proposed cutting the corporate tax rate to 15% and offering certain incentives for domestic production. All three companies manufacture cars in the U.S., so they would all benefit.
Tariffs on imported cars would help raise domestic prices, while tariffs on Chinese EVs would protect U.S. automakers from Chinese competition, although no Chinese cars are currently sold in the U.S.
The Republican control makes Trump's tax and tariff policies more likely to be implemented, which is another reason for the stock price rise. The reduction in policy uncertainty makes it easier for investors to predict the impact of these policies on the market.
Another reason for Ford's better performance is that General Motors' stock has outperformed Ford in recent trading. As of Wednesday, General Motors' stock had risen about 17% in the past month, while Ford's stock barely changed.