RBC Capital Markets has upgraded Ford Motor Company F 1.05% from Sector Perform to Outperform and believes Ford and rival General Motors Company GM 0.26% could have the makings of a solid pair trade. According to analyst Joseph Spak, Ford has a number of positive catalysts ahead, especially relative to GM. For starters, market expectations for Ford are relatively low. The company recently reiterated its 2017 guidance first issued back in September, which Spak believes is conservative.

However, a lot has changed since September. The new administration plans for aggressive tax cuts and domestic tax incentives, which Spak believes will favor Ford over GM. Roughly 72 percent of Ford’s North American production volume comes from the U.S. compared to just 62 percent or GM.

“Considering border-adjustability along with other factors such as a lower corporate rate and capex deductibility, F believes that it comes out neutral to positive and better than competition,” Spak explained.

While GM is expected to grow its North American production by 10 percent in the second half of the year, it will be running…

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