When the U.S. imposed tariffs against the Chinese electric vehicle sector, Europe followed. The ultimate impact of such taxes is higher prices for consumers. It lowers competition and favors domestic firms that operate inefficiently. Still, the government needs to tax Chinese EV makers because the Chinese government subsidizes the industry.
The EV tariff war is also hurting the automotive sector as a whole. Stellantis (STLA) shares peaked in March at above $28.00. It closed at around $20 last week when its Investor Day event failed to regain shareholder confidence. Markets are still evaluating new CEO Carlos Tavares, who outlined nine key strategic initiatives to unlock the company’s value.
The firm has a partnership with Leapmotor, a Chinese new energy vehicle (NEV) maker. Unfortunately, the slump in Li Auto (LI) and Nio shares indicates the market’s concerns for Chinese NEV suppliers. In turn, Stellantis will have challenges in its Leapmotor partnership.
Investors betting that automakers trade at cheap valuations may consider General Motors (GM). It has the strongest profitability profile. Autoliv (ALV), which supplies safety solutions for the sector, is an attractive investment. BYD (BYDDF) is the strongest automotive firm in China.
Stocks with weak prospects include Li Auto (LI) and Rivian (RIVN). CarMax (KMX), which sells used cars, has rising inventory risks.