Advance Auto Parts is emerging as a possible winner after President Donald Trump ordered a 25% tariff on imported passenger vehicles, light trucks and some auto parts. If the effective tax on foreign vehicles takes effect next week as scheduled, consumers are going to pay more for cars and trucks — unless they hang onto their wheels and spend money fixing them up.
Or at least that’s the sentiment among investors who drove shares of Raleigh-based Advance Auto 6.6% higher to $40.34 a share, a day after Trump signed the executive order. Shares of other auto parts retailers such as AutoZone, O’Reilly Automotive and Genuine Parts also gained.
Advance Auto shares have tumbled from a high of $88 per share over the past year in the midst of CEO Shane O’Kelly’s three-year effort to boost profits. It’s starting to open new stores following the closing of more than 500 outlets and four distribution centers and severing relations with more than 200 independent locations.
Plans by the retailer to expand along the East Coast and Midwest coincided with the White House’s trade announcement. The 25% tariff will increase the average car price by about $6,000, Morgan Stanley analyst Adam Jonas estimated. The sticker shock would probably hit buyers of domestically made vehicles since higher prices for imports would carry over to dealerships and car lots selling vehicles produced in the U.S.
More buyers, in turn, may turn to used cars, pushing up prices in that market and prompting some owners to refrain from buying new vehicles. In that scenario, Jonas envisions “the `Cubanization’ of the US car fleet.”
Cuba is well known for decades-old models traversing the streets of Havana, resulting from limited trade, including new vehicles and auto parts, following communist Fidel Castro’s takeover of the island in 1959.
“A strict implementation of a 25% tariff could add further elongation of average car age (the ‘Cubanization’ of the US car fleet),’” Jonas wrote today in an analysis. For the entirety of the domestic auto market, he added, “the impacts are so potentially negative that we struggle to see how such measures can truly remain a ‘permanent feature’ of the US automotive landscape.”
Rising auto imports pose “a critical threat to U.S. national security,” the White House said in a statement. “These new tariffs aim to ensure the U.S. can sustain its domestic industrial base and meet national security needs.”
The president said the tariffs are going to be permanent. Some industry analysts question whether that will be the case. Initially, Trump proposed 25% tariffs on Canadian and Mexican imports, partly as punishment for fentanyl entering the U.S. from those countries.
Yesterday’s order broadened the impact to all vehicles produced overseas, raising the likelihood of higher prices since nearly half of vehicles sold in the U.S. are imports.
UBS analyst Joseph Spak estimated that 25% tariffs on cars and car parts could erase 2025 profits for Ford Motor and General Motors. J.P. Morgan’s Ryan Brinkman wrote that GM and Ford face “material earnings risk as draconian tariffs seem likelier than ever.”
As shares of the big U.S. automakers sank, the stock of parts retailers surged higher. If car owners, in fact, spend more to keep their vehicles running, they’re going to have more Advance Auto stores to patronize.
The company said it plans to open at least 100 new stores through 2027, including 30 new US locations this year. As of this past December, it operated about 4,800 stores, mostly in the US.
The expansion follows the closing of underperforming stores in markets where Advance Auto struggled to compete with rivals. It now operates in markets where its store density ranks first or second.
