Brace for impact, as the wrecking ball of President Donald Trump’s sweeping 25% tariffs on foreign auto imports and vehicle parts will be effective from April 3. This time, he’s (probably) not postponing his plans. “This is permanent, 100%,” Trump said during his announcement on Wednesday.
Now industry analysts are ringing the alarm bells, comparing his move to global financial disasters, likening the tariffs to a pandemic-style global disruption of the automotive supply chain and the “cubanization” of cars.
Welcome to the Friday edition of Critical Materials, your daily round-up of news and events shaping the future of electrification. Also on our radar today: Sales of Chinese EVs in Europe dropped to a two-year low in February and Trump’s tariffs could cut Stellantis’ earnings by 75%.
30%: Tariffs Could Spell Disaster For The Auto Industry
I’m not trying to be alarmist, but the implication of Trump’s 25% tariffs on foreign-made cars and imported vehicle parts could be apocalyptic for the auto industry.
Cars made under the U.S.-Mexico-Canada (USMCA) free trade agreement also seem on track to be affected by the tariffs from April 3. All cars sold in the U.S. have some foreign parts content. There’s no true American-made vehicle with 100% of the parts sourced locally. That’s not how the car industry works. It’s a highly globalized supply chain network.
Trump won last year’s presidential election on the heavily campaigned topic of strengthening the U.S. economy and reducing the cost of living for Americans. Now, industry experts estimate his tariffs could be a $100 billion hit on American consumers’ wallets.
Long-time Tesla bull and Wedbush Securities analyst Dan Ives said in a note that the tariffs could be “Armageddon” for the auto industry. He said they would be a “back breaker” for car brands and are simply “untenable.”
Morgan Stanley analyst Adam Jonas said if the tariffs remain intact, it would lead to the “cubanization” of the auto industry, where buyers keep their cars longer and avoid purchasing new and pricey vehicles, the Detroit Free Press reported.
Cox Automotive analyst Erin Keating told Reuters that the pandemic had priced out 10% of American car buyers out of the market. Affordability still remains the priority for the majority of U.S. car shoppers. Tariffs could price out another 10% of consumers.
Above all, the president has warned automakers about increasing car prices, according to the Wall Street Journal. Automakers that increase prices would reportedly be looked at unfavorably by the White House, the report states. That’s like punishing a restaurant for increasing menu prices right after increasing the cost of their ingredients.
Plus, Biden’s Inflation Reduction Act has already brought more manufacturing to the U.S. and spurred jobs in that sector. If the former administration’s EV policies remained intact, the U.S. was expected to add 150,000 EV manufacturing Jobs, 125,000 battery jobs and 140,000 charging infrastructure jobs by 2030, according to the International Council On Clean Transportation.
What we’re getting instead is just bad news for our wallets, thousands of American jobs on the line and a restriction on our freedom of movement.
60%: Sales Of Chinese EVs Drop In Europe
Across the Atlantic, some early signs are emerging of European brands making a comeback against the Chinese EV behemoths. Only 6.9% of EVs registered in February in Europe came from Chinese car brands, down from 7.8% in January, marking a two-year low, Bloomberg reported citing Dataforce.
EV sales in the European Union grew by 26% last month despite the sales of Chinese EVs falling and the growing backlash against Tesla due to CEO Elon Musk’s interference with politics on the continent.
There are a couple of primary reasons why that’s happening. Europe’s tariffs against Chinese cars reach as high as 45% and European brands, including Volkswagen and Renault, have an onslaught of small, affordable EVs that are locally made.
90%: Tariffs May Slash Stellantis Revenue By 75%
Stellantis is already reeling from the shift to electrification and increased competition from Tesla and Chinese automakers. Trump’s tariffs could add more fuel to the fire as Stellantis prepares to take a hit worth billions of dollars to its business.
As per a report from investment bank Jeffries, Stellantis’ earnings may fall by 75% if tariffs remain unchanged. The automaker is currently being led by Chairman and interim CEO John Elkann after former CEO Carlos Tavares resigned in December.
Here’s more from Automotive News:
Jeffries said Stellantis makes about 61% of the cars that it sells in the U.S. domestically, about the same as GM but well below Ford, at 80%. However, Stellantis has a low factory utilization rate of 52% in the U.S. — after years of declining sales — and has an excess capacity of 1.3 million cars that could potentially be shifted to the U.S. from Mexico and Canada, mitigating the impact of tariffs.
Stellantis, which has brands like Jeep, Ram and Dodge under its umbrella, sold just over 300,000 cars in the U.S. in 2024. If they were tariffed last year, the cost burden would have been $4.3 billion. And parts alone would cost another $2.8 billion, according to the report.
100%: Have The Tariffs Influenced Your Car Buying Plans?
Photo by: InsideEVs
The shift towards EVs is already rocky. Now comes another potential blunt force impact on the automakers, suppliers and consumers. Vehicle prices are expected to rise, incentives and discounts may dry up, repair and ownership costs could increase and demand for used vehicles could grow, even though inventory would likely be strained.
Did you plan to buy a car this year? Are you speeding up your purchase before things get worse? Or do you plan to wait and watch?
Have a tip? Contact the author: suvrat.kothari@insideevs.com
