U.S. automakers have weathered a storm of trade war tensions, higher interest rates and rising vehicle prices in 2018. Therefore, news that China is proposing to reduce the country's car sales tax by 50% is welcome news to manufacturers and investors.

Under the proposal, China's top economic planning body, the National Development and Reform Commission, plans to slash the car sales tax from 10% to 5% to revive the nation's embattled automotive market. "This is definitely good news and a message the market has been waiting for," Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler, told Bloomberg.

Investors who wish to add auto stocks to their portfolio shouldn't lose sight of the road ahead. These three leaders of the U.S. auto industry make significant sales in China and are worth further consideration.

General Motors Company (GM)

Headquartered in Detroit, Michigan, GM designs, manufactures and sells cars, trucks, crossovers and automobile parts. The company, with a market capitalization of $51.47 billion, operates through three segments: GM North America, GM International and GM Financial. GM sold more than 4 million vehicles in China for the first time in 2017, up 4.4% from 2016. The automaker credits China as its largest retail market for the sixth consecutive year. As of Nov. 2, 2018, GM stock has a year-to-date (YTD) return of -7.95%, but it has returned 8.67% over the last month. The company pays a 4.15% dividend.

The GM share price started to rally several days before the China news broke and accelerated to gap above a five-month downtrend line and the 50-day simple moving average (SMA) on news that the company plans to cut its salaried workforce. Those who wish to buy should look for pullbacks to the $34 level, where the price should find a confluence of support from a five-month downtrend line, the 50-day SMA and horizontal line price support from the March and September swing lows.

Chart depicting the share price of General Motors Company (GM) stock

Ford Motor Company (F)

With a market cap of $36.95 billion, Ford is one of the world's leading car manufacturers, known for its Ford and Lincoln brands. The company operates an automotive segment through which it sells its vehicles and a financial services segment that offers a range of automotive financing products. Ford sold roughly 1.2 million vehicles in China in 2017, down 6% year over year. Trading at $9.29 with a dividend yield of 6.28%, the stock is up 4.68% over the past month, outperforming the industry average return by nearly 7% as of Nov. 2, 2018.

Like GM, volume and price momentum started appearing in Ford stock several days before the sales tax story hit the newswires. The share price gapped above the 50-day SMA and recent downtrend line when the news was released before closing down nearly 3% to start November. Investors should look for an entry price close to $9 – a level supported by the previous downtrend line and 50-day SMA.

Chart depicting the share price of Ford Motor Company (F)

Tesla, Inc. (TSLA)

Tesla, founded in 2003 by Martin Eberhard and Marc Tarpenning, is an automotive and sustainable energy company that designs, manufactures and markets electric vehicles and energy generation and storage systems. The company made headlines in August when its CEO and chair, flamboyant entrepreneur Elon Musk, toyed with a plan to take Tesla private – he has since reversed gear on that idea. The company's 2017 Chinese sales were $2 billion, up from $1 billion in 2016. To lower production costs for its cars sold in China, Tesla is constructing a factory in Shanghai. Tesla has a market cap of $58.73 billion. Its shares have returned an impressive 27.4% over the past month and 3.34% YTD as of Nov. 2, 2018.

Teslas shares have traded within a roughly $130 range throughout most of 2018. After a 34% sell-off between August and early October, the stock rallied sharply to close last month up 30%. Traders should look for entries at the $280 level, where the share price is likely to find support from a downtrend line that connects several swing highs and horizontal line support. Investors could wait for the relative strength index (RSI) to give a reading near 30 to confirm oversold conditions before actioning a trade.

Chart depicting the share price of Tesla, Inc. (TSLA)