Tariffs Could Reportedly Cost US Carmakers $10K per Vehicle
This week will bring new 25% tariffs on auto imports, a change that could shake the car industry.
As Bloomberg News reported Saturday (March 29), these new levies — which will first be focused on assembled vehicles but could eventually include car components — could slash profits by as much as $10,000 per vehicle.
Some of the hardest-hit car companies could include Porsche, Mercedes-Benz, Stellantis and Volkswagen, the report added, citing analysts from Bloomberg Intelligence.
Stellantis and Volkswagen have both recently had their credit ratings reduced, the report adds, while Ferrari has warned that the tariffs could force it to raise the price of some of its vehicles in the U.S. by up to 10%.
“It’s the unknown that the market is exponentially scared of,” Bloomberg Intelligence credit strategist Joel Levington said. “It certainly opens up the potential for not necessarily defaults, but for credit quality weakening at a more rapid pace in autos than in other spaces.”
The report also noted that moving more production to the U.S. may offset some of the tariff impact, but that such a shift would be costly.
“Automotive supply chains were built over decades to optimize production costs,” said Nichole Hammond, senior portfolio manager at Angel Oak Capital. “It will take years to re-shore to the U.S. if companies choose to do so.”
The tariffs, set to go into effect April 2, were ordered last week by President Donald Trump, with the White House arguing they are necessary to revitalize the American car industry and stop the flow of automotive imports from flooding the market.
Trump told NBC News Saturday that he hoped the tariffs would lead foreign carmakers to increase their prices, as it would cause people to purchase American-made vehicles. Asked by the network about his message to car companies he said:
“The message is congratulations. If you make your car in the United States, you’re going to make a lot of money. If you don’t, you’re going to have to probably come to the United States, because if you make your car in the United States, there is no tariff.”
The news comes amid a time of increasing economic pressure on consumers, one in which “the threat of tariffs and the current administration’s hints at a likely recession have significant implications for all consumers and how they will spend their paychecks in the weeks and months ahead,” PYMNTS CEO Karen Webster wrote recently.
“Consumers across all income brackets are likely to pull back on spending, but for different reasons,” that report continued.
“Those with savings cushions may voluntarily push pause on spending until they have more certainty in order to preserve cash and income, while those without financial shock absorbers in the form of savings will be forced to cut back out of necessity.”
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