5 Auto Stocks to Buy as China Reduces Import Tariffs on Cars

On May 22, China decided to slash import tariffs on passenger cars and auto parts starting as early as on Jul 1. Following the easing of trade tensions with the United States, China’s latest move is definitely expected to drive up the U.S. auto market. In fact, as the biggest auto industry for foreign automakers, a tax relief on auto imports to China is a big positive for foreign automakers that have struggled to sell cars in China in recent times.

The move comes at a time when trade tensions between the United States and China are being dialed down. On May 20, U.S. Treasury Secretary Steven Mnuchin issued comments which indicated that trade negotiations are processing smoothly. With trade relations between the two countries set to improve and China easing tariffs on auto imports, investing in auto stocks looks like a great option.

Auto Import Tariffs Down From 25% to 15%

On May 22, China’s Finance Ministry said that import tariffs on passenger vehicles will be reduced from the previous 25% to 15%. Also, import duty on auto parts has been reduced from about 10% to 6%. Both the new import tariffs will become into operation by Jul 1. Moreover, average tax on vehicles will now be around 13.8%.

China’s latest move is expected to benefit car manufacturers, including those involved in manufacturing high-end cars. Tariff relief is clearly good news for foreign automakers as China imported around 1.22 million automobiles in 2017, constituting around 4.2% of China’s total vehicle sales. Auto giants like Elon Musk-led Tesla Inc TSLA, Daimler AG’s Mercedes-Benz and Germany’s BMW are likely to benefit from these latest developments.

U.S.-China Trade Tensions Dialed Down

In an interview to Fox News on May 20, Treasury Secretary Steven Mnuchin said that the United States has put “the trade war on hold.” Mnuchin added that the tariffs on China would be held back as the two countries negotiate an agreement. The major objective of such a negotiation would be to reduce the massive trade deficit that the United States has with China. 

Speaking to CNBC on Monday, Mnuchin reiterated his stance on tariffs stating that the two sides had “made very meaningful progress,” and now it is up to both the United States and China to “implement it.” Mnuchin’s comments boosted investor sentiment and are good news for the auto industry. (Read More)

5 Auto Stocks to Buy Now

China tariff relief on auto imports makes auto stocks a wise investment choice. The fact that this announcement comes at a time when trade negotiations between the United States and China are proceeding smoothly is another positive for the auto industry.

In this context, we have selected five auto stocks that are expected to gain following these developments. These stocks also flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Oshkosh Corporation OSK is a designer, manufacturer and marketer of specialty vehicles and vehicle bodies worldwide.

This Wisconsin-based company has a Zacks Rank #1. The expected earnings growth rate for the current year is 35.56%. The Zacks Consensus Estimate for the current year has improved 7.3% over the last 30 days. Oshkosh has gained 22% in the past year.

Allison Transmission Holdings, Inc. ALSN is a designer and seller of commercial and defense fully automatic transmissions.

This Indiana-based company has a Zacks Rank #1. The expected earnings growth rate for the current year is 47.42%. The Zacks Consensus Estimate for the current year has improved 6.8% over the last 30 days. Allison Transmission Holdings has gained 18.3% in the past year.

Fox Factory Holding Corp. FOXF is a designer, manufacturer and marketer of ride dynamics products globally.

This California-based company has a Zacks Rank #2. The expected earnings growth rate for the current year is 15.09%. The Zacks Consensus Estimate for the current year has improved 2.8% over the last 30 days. Fox Factory Holding has gained 19.9% in the past year.

Ferrari N.V. RACE is a designer, producer and seller of luxury performance sports cars.

This Maranello-based company has a Zacks Rank #2. The expected earnings growth rate for the current year is 11.91%. The Zacks Consensus Estimate for the current year has improved 11.2% over the last 30 days. Ferrari has gained 58.9% in the past year.

Lear Corporation LEA is a designer of automotive seating and electrical distribution systems.

This Michigan-based company has a Zacks Rank #2. The expected earnings growth rate for the current year is 13.41%. The Zacks Consensus Estimate for the current year has improved 1.2% over the last 30 days. Lear has gained 39.7% in the past year.

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Tesla, Inc. (TSLA) : Free Stock Analysis Report
 
Fox Factory Holding Corp. (FOXF) : Free Stock Analysis Report
 
Lear Corporation (LEA) : Free Stock Analysis Report
 
Allison Transmission Holdings, Inc. (ALSN) : Free Stock Analysis Report
 
Oshkosh Corporation (OSK) : Free Stock Analysis Report
 
Ferrari N.V. (RACE) : Free Stock Analysis Report
 
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