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(Bloomberg) -- US rental car company stocks soared on Thursday as sweeping new auto tariffs are expected to lead to greater demand for used cars, in turn raising the value of these companies’ fleet of vehicles.
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Shares of Hertz Global Holdings Inc. and Avis Budget Group Inc. each surged by more than 20%. Hertz saw its biggest gain since the company went public in 2021 after emerging from bankruptcy, while Avis posted its best day since 2022.
Investors bid the stocks up because they see tariffs boosting the value of the rental car companies’ fleets, research outfit Vital Knowledge said in a note.
The Trump administration announced Wednesday 25% tariffs on fully assembled vehicles that will go into effect next week, with the scope expanding by May 3 to include major auto parts. Analysts had previously estimated that levies threaten to drive up the cost of new cars by as much as $12,000.
“That will cause more people to trade down to looking at a slightly used car, and put more demand on those values,” said Jeremy Robb, Cox Automotive’s senior director of economic and industry insights.
For the most part, Hertz and Avis have slid amid a broader market selloff. Avis’ stock had tumbled 36% from a February high through Wednesday’s close, while Hertz had fallen 23% from its own recent peak.
Used-car prices may rise by around 3% this year, Robb said, which is slightly higher than the long-run average.
Secondhand car companies are also seen as winners. CarMax Inc. ended the session 2.5% higher.
“If prices on new vehicles are going up, the used vehicles become more attractive,” Bloomberg Intelligence analyst Steve Man said.
US automakers General Motors Co. and Ford Motor Co., seen as the most vulnerable to the new tariffs, saw shares fall following the tariff announcement, while Elon Musk’s Tesla Inc. stock rose 0.4% Thursday.
--With assistance from Michael Sasso.
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