Shares of heavily shorted car rental companies Hertz and Avis Budget Group soared on Thursday after U.S. President Donald Trump announced plans to impose a 25% tariff on imported vehicles. The prospect of significantly higher car prices may drive more consumers to choose rentals over buying new vehicles.<\/p>\n\n\n\n
The proposed levies could tack thousands of dollars onto the price of an average car in the U.S., prompting concern among industry groups. The American Automotive Policy Council emphasized that the tariffs must be implemented carefully to avoid passing on costs to consumers.<\/p>\n\n\n\n
Hertz shares surged 23.8%, and Avis gained 23%, rebounding from steep losses over the past year. Both companies are heavily shorted, with 13% and 14.5% of their outstanding shares, respectively, in short positions, according to LSEG data.<\/p>\n\n\n\n
“These rental companies actually benefit from the tariffs,” said Dennis Dick, chief strategist at the Stock Trader Network. “If car prices go up, some people may decide it\u2019s better to rent than to buy.” He added that a short squeeze is also fueling the rally.<\/p>\n\n\n\n
J.P. Morgan analysts noted that auto parts and service companies could see gains as well. As consumers hold on to their vehicles longer, demand for repairs and parts is expected to rise.<\/p>\n\n\n\n
Shares of auto parts retailers also moved higher: O’Reilly Automotive and AutoZone both gained about 2.5%, while Advance Auto Parts climbed 5.4%.<\/p>\n\n\n\n
Conversely, traditional car manufacturers with international supply chains fell sharply. General Motors shares dropped 8% amid concerns over the financial impact of the new trade policy.<\/p>\n\n\n\n
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