After serving as a bit of punching bag for then President-elect, U.S. auto executives are starting to fall in line (at least from an optics standpoint) about sorting their car assembly, and the ultimate destination of that car, according to national borders. The companies have been threatened with border taxes if a car is assembled in Mexico or Canada and then imported back into the US. For his part, Trump promised the CEO’s of of the Big 3
relaxed environmental regulations and a sped up regulatory review on domestic factories. It’s also rumored that the new administration could slash regulations on the cars themselves like fuel efficiency and emission standards.
Yesterday shares of General Motors (GM) made a new 52 week high, breaking out of a flag that the stock has formed over the last couple months above the downtrend that had been in place from the 2013 (post financial crisis re-IPO highs), with what now appears to be a clear target at those prior highs near $42:
GM is set to report Q4 results on February 7th, 6 days after they report January sales. The options market is implying a little less than a 3.5% one day post earnings move, which is rich to the 4 qtr one day post earnings move of about 2.5%.
This morning, Ford (F) reported Q4 results that were generally better than expected but issued a squishy outlook. Shares of F are down a bit as I write and down about 12% from the 52 week highs made in May, a fairly stark contrast to GM which is up 10% ytd, and at new 52 week highs vs F, up only 5+% ytd, and 30% from its post financial crisis highs made in mid 2014. From a technical standpoint, Ford is trying to do what GM already has. And break out above an epic multi-year downtrend:
But there’s more stories in cars today than GM and Ford. And that brings me to Tesla (TSLA) which we discussed on Tuesday (here), and CNBC’s Fast Money that night:
The stock chart looks a lot like GM’s having broken a long term downtrend from the prior all time highs. I guess the most important take-away is that the stock was an under-performer in 2016. And some of that was election related as well, until it became clear that CEO Elon Musk was willing to play ball, agreeing to attend a tech CEO summit with the President-elect in early December. TSLA is up 43% since Dec 2nd, and up more than 20% in 2017.
TSLA could have been the poster-child for the America First talking points. The company made all 76,000 cars sold in the U.S. domestically in 2016, and is in the process of opening a massive factory in Nevada dubbed the “gigafactory”. The stock could be negatively affected by government policy regarding tax incentives. But it’s unclear how that would play out so far. There could be a push and pull optically between the fact that TSLA is an innovative US tech company, and the fact that their mission is based on fighting climate change, something the President and many of his key appointments are key to downplay.
I’d add that over time I suspect that many of the tasks done in something like the gigafactory will be automated. This is a fact that all politicians have been slow to acknowledge. Manufacturing jobs aren’t down in the U.S. and climbing in other countries. They’re declining everywhere as robots replace humans. And blue collar jobs are just the start of it as artificial intelligence is starting to disrupt everything from trading and investing to law offices.