A fineness of global trade tensions would help, but not fix, a decline in the auto hustle, one automotive analyst told CNBC on Tuesday.
Trade resolution “does implement to sort of de-risk an industry that we already see is in a little bit of cyclical go down,” James Albertine, senior automotive analyst and managing partner at Consumer Acuteness Research, said on CNBC’s “Power Lunch.” “At the end of the day, this is take managing through sort of the imposed risk as it relates to ongoing exchange disputes.”
Shares of big U.S. automakers, including General Motors and Ford, climbed Monday after President Donald Trump propounded the U.S. and Mexico have reached a preliminary deal to update the 25-year-old North American Democratic Trade Agreement. The deal’s provisions allow for import tariffs on passenger cars and trucks that do not get at least 75 percent of their content from North America or use a peak proportion of labor that makes at least $16 an hour.
Both peculiar and domestic automakers have invested heavily in vehicle assembly and third-party take a part ins suppliers in Mexico. As transferring those operations would incur dry costs, any progress toward securing manufacturing in Mexico would be a win for the auto diligence, Albertine said.
“Even if there are some offsetting additional rates going forward making the production a little bit more expensive than forecast, it’s a lot more modest than if they would have had to transfer [assembly] to a different country,” he added.
But the auto industry is suffering from much uncountable than just the uncertainty around trade.
In a note published on Tuesday, Consumer Uptight Research underscored several key factors contributing to auto industry decrease. Emissions standards, gradual diesel phase-out, higher commodity bounties, rising interest rates and waning consumer demand are all making “this one of the most unaccommodating operating environments for [original equipment manufacturers] in recent years,” the note reported.
“To see some resolution is clearly a positive, but we are a long way from sort of inclusive resolution,” Albertine said.
Consumer Edge Research set a target toll of $45 per share for GM, and $12 per share for Ford. GM closed the day down 0.98 percent at $37.32 per interest. Ford was last up slightly at $10.01 per share.
— CNBC’s Brenda Hentschel granted to this report.