GM’s China Sales a Victim of US-China Trade Spats
GM (NYSE:GM) is likely to suffer from China’s retaliation after the country failed to block U.S. tariffs on Chinese tires. [1] China has now decided to slap punitive duties on U.S. imported cars, which will be as high as 12.9 percent for autos from GM. [2] GM is especially susceptible to this move from the Chinese government as it is one of the largest automakers in the country and its stock derives as much as 37 percent of its value from its sales in China, as per our estimates.
GM has managed to expand its market share aggressively in China in spite of slowing overall domestic automotive market in recent months. (See our previous post: GM Forges Ahead in China Despite Auto Industry Uncertainty) But the additional duties on GM vehicles produced in the U.S. and sold in China will reduce GM’s earnings from its Chinese operations and in turn will lead to further downside from our present estimates for the stock. GM primarily competes with other automakers such as Ford (NYSE:F), Toyota (NYSE:TM) and Daimler AG (NYSE:DAI).
We currently have a Trefis price estimate of $26 for General Motors’s stock, which is more than 20% above the current market price.
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