All You Need is Love - InvestingChannel

All You Need is Love

Proprietary Data Insights

Financial Pros Top Automotive Stock Searches This Month

#2Northern Oil & Gas195
#3EOG Resources177
#4Devon Energy159
#5Occidental Petroleum159

Don’t Bite The Hand That Feeds You

It’s not just you. Auto dealerships have been charging an arm and a leg for cars.

Major car companies aren’t pleased.

Ford (F) and General Motors (GM) issued a stern warning for dealers ignoring suggested manufacturer’s suggested retail price (MSRP).

Until now, this has never been heard of.

With cars in short supply, dealers have taken it upon themselves to jack up prices for cars and trucks to squeeze all the profits they can.

Auto manufacturers told dealers the practice was ‘unethical’ and could jeopardize supply to those businesses in the future.

While a historical rarity, said 82% of new vehicles purchased in January were above MSRP.

Dealerships aren’t thrilled with the ask either.

Threatened by direct to consumer channels and limited inventory, many say they’re just allowing the free market to dictate prices.

That may be true. But dealerships don’t have to worry about the optics and politics that the manufacturers do. 

However, the breadth of the problem could push consumers to non-traditional channels including Carvana (CVNA) and CarMax (KMX).


All You Need is Love

Key Takeaways

  • The Ambassador Bridge, which carries $300 million worth of goods per day and ~30% of trade between the U.S. and Canada was reopened after protestors blocked it for nearly two weeks over Covid vaccine mandates.
  • Automotive companies were forced to curtail production and send workers home due to a lack of parts.
  • Vaccine protests have cropped up around the world, especially since Omicron swept through many countries and caseloads are already on the decline.

Protestors shut down the Ambassador Bridge for over a week, a major trade artery between the U.S. and Canada.

Yesterday, police arrested and towed trucks off the bridge with operations resuming today.

The Backstory

Truckers seethed over vaccine mandates for international truckers imposed by the Canadian government for truckers entering Canada from the U.S.

Largely peaceful, the protests brought in truckers and supporters from across Canada. Protestors parked cars and erected tent encampments, disrupting life and shutting down traffic.

Notably, truckers parked on the Ambassador Bridge, the largest trade conduit between the U.S. and Canada.

Importance of the Ambassador Bridge

No other structure carries as much trade between the U.S. and Canada as the Ambassador bridge.

Canada is the single most important trade partner with the U.S., accounting for 14.6% of all exports, the most of any country, and the 3rd largest country we import from at 11.4%, sitting just behind Mexico and decently behind China.

The Ambassador Bridge accounts for ~30% of the trade between the U.S. and Canada and carries $300 million worth of goods per day.

Shutting down the bridge forced automakers from General Motors (GM), to Ford (F) to curtail production over the past week and even send employees home since parts were unavailable.

That doesn’t bode well for the inflation readings which showed automobile prices remain high with demand outstripping supply.

Protests Spread

Restrictions from France to New Zealand prompted similar protests and government pushback.

With Omicron raging across the globe, many are beginning to wonder whether additional efforts to combat Covid are worth it.

Already, in the U.S., some of the most restrictive state mandates are beginning to ease as caseloads decline.

After years of dealing with the pandemic, many are psychologically burned out, regardless of their personal beliefs.

The Bottom Line: Even if the Ambassador Bridge is reopened, the stoppages already disrupted auto production.

That doesn’t just hurt stocks like Ford and General Motors but their local suppliers like Magna International (MGA) and BorgWarner (BWA).

And there’s no guarantee that we still won’t see a shortage of truckers to transport goods back and forth.

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