Shares of the world’s largest automakers, including Chevrolet-maker General Motors (GM) and Dodge-maker Stellantis (STLA), were hit hard at the start of the week as 25% tariffs on Mexico and Canada came into effect Tuesday.
On Monday, President Donald Trump confirmed the delayed tariffs would go ahead as planned, sending the S&P 500 on its way to its worst day since December, as investors sought shelter from sectors most exposed to the levies. The White House also said it was adding an additional 10% tariff on Chinese imports, prompting Beijing to slap 15% tariffs on some U.S. goods. Canada has also said it will introduce retaliatory tariffs of 25% on $107 billion in U.S. goods.
Big Auto Stocks Hit
STLA’s shares in Italy (IT:STLAM) tumbled almost 7% on Tuesday after GM stock ended Monday down 3.6%, its biggest drop since January 28th. Like Detroit rival Ford (F) the companies’ supply chains are interwoven with both Mexico and Canada. GM, the largest U.S. automaker, made about 900,000 vehicles in Mexico last year, with many of these bestselling models like the Silverado pickup and the GMC Sierra.
In 2024, about 23% of Stellantis sales were sourced from Mexico, while GM sourced 22% and Ford just under 15%, says S&P Global Mobility, which warns of a “massive impact on the auto industry,” from the tariffs. In all, about one in five of all light vehicles sold in the U.S. was imported from either Canada or Mexico.
S&P Global Mobility reckons about 54% of U.S. light-vehicle sales were produced in the US, 15% in Mexico and just under 7% in Canada. A 25% tariff on the average $25,000 cost of a vehicle from Mexico and Canada would add $6,250.
European Auto Industry Awaits Fate
Meanwhile, the auto industry in Europe is also fearful that President Trump will slap tariffs on exports after signalling he would impose 25% tariffs on cars as early as next month. Last month he signalled that the White House would introduce tariffs of at least 25% on autos, semiconductors and pharmaceuticals starting April 2nd.
Trump called for an investigation of other nations’ tariff and tax policies in search of a more “balanced” trading relationship. He said this could result in new reciprocal tariffs taking effect as soon as April 2nd, the day after the investigation is set to conclude. “The April Second Reciprocal Tariff date will remain in full force and effect,” Trump said in a recent post on his Truth Social platform.
Renault’s stock in Paris (FR:RNO) and Mercedes-Benz in Frankfurt (DE:MBG) were also down heavily in morning trading. German-listed stocks of Volkswagen (DE:VOW3) and BMW (DE:BMW) also fell sharply. Corresponding to these moves the US tickers for Renault (RNLSY), Mercedes (MGBAF) and VW (VWAGY) look set to open lower.
Japan’s Carmakers Also in Line
Japanese carmakers are also in the firing line. Shares of Toyota (TM) fell in Japan (JP:7203). It sold 2.33 million units in the U.S. last year, a quarter of its global sales of 10.15 million vehicles. Around 530,000 of the U.S. sales were direct imports from Japan. Meanwhile, Honda (HMC) would face a hit of approximately ¥700 billion ($4.6 billion) annually in the event of a trade war, according to the Japan Times. A 25% tariff would represent a third of Toyota’s Fiscal 2025 profit guidance and nearly half of Honda’s, according to Bloomberg Intelligence.
Nissan (NSANY) exports 320,000 vehicles annually from Mexico to the U.S. and the carmaker’s CEO, Makoto Uchida, suggested that the company could shift production from Mexico to the U.S. in the event of higher tariffs. “We are exporting a large volume to U.S., so if there’s a high tariff, this will have huge implications on our business, so we need to monitor this carefully,” Uchida said, according to a Reuters translation.
It comes amid a tough period for some of the biggest automakers, Tesla (TSLA) sales are slumping and STLA posted a big drop in profit for 2024. GM’s fourth-quarter results beat expectations, though, and the company last week announced a $6 billion share buyback program.
Is GM a Good Stock to Buy?
Overall, Wall Street has a Moderate Buy consensus rating on GM stock, based on nine Buys, five Holds and two Sells. The average GM price target of $59.69 implies about 25% upside.
