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Is Trump’s Victory Good or Bad for the Auto Industry?

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Election results

Donald Trump has been elected as the 45th president of the US. He defeated Hilary Clinton in a tough competition. There were several key issues that Trump addressed. The issues clearly got support from the majority of US voters on November 8, 2016. Some issues that he talked about during his presidential campaign could directly or indirectly impact the auto industry. Before we start looking at these issues, let’s take a quick look at how Wall Street, especially auto investors, reacted to the outcome of the 2016 presidential election.

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Auto stocks fell

On November 9, after Trump’s victory, the broader market (SPY) traded on a mixed note. The S&P 500 benchmark index remained in red territory initially during the day. It recovered later and closed at $2,163.26 with 1.1% gains for the session. Ford, the second-largest US automaker, opened the session on a negative note. Later, it erased the losses and closed at $11.57 with minor gains of 0.83%.

Except for Ford, all of the other mainstream auto companies including General Motors (GM), Fiat Chrysler (FCAU), Toyota (TM), and Honda (HMC) ended the session in red. General Motors lost ~2.4% and closed at $30.96. Fiat Chrysler, Toyota, and Honda fell 2.5%, 1.7%, and 1.8%, respectively during the session.

Going forward, Trump’s efforts to bring jobs back to the US from Mexico could hurt automakers’ profitability. All of the mainstream automakers try to minimize their costs by manufacturing and assembling a large number of cars in Mexico for the US market.

Tesla (TSLA), a popular US electric automaker, also witnessed value erosion of ~2.5% during the session and closed at $190.06 on November 9, 2016.

Series overview

In this series, we’ll find out how Trump’s victory in the US presidential election could impact the auto industry in general.

Trump targeted Ford during the election campaign. He criticized Ford’s plans to shift its small car manufacturing units to Mexico. We’ll explore Ford’s options now that Trump won the election. Later in this series, we’ll also discuss how Trump’s victory could impact electric vehicle growth and autonomous vehicle development.

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