On Wednesday, March 27, U.S. President Donald Trump announced a 25% tariff on imported automobiles, marking a significant challenge for car manufacturers. While the White House claims the measure will boost domestic production, it has sparked concerns among automakers that depend on international supply chains. Amid this backdrop, wealth management firm Bernstein warned that these tariffs could add approximately $6,250 to the price of each affected vehicle.
In context, the new tariffs on imported vehicles are set to take effect on April 3 in addition to the existing duties, while levies on auto parts are expected to roll out in May or later.
Car Prices to Soar?
According to estimates from the Bernstein team led by four-star-rated analyst Daniel Roeska, Trump’s newly announced tariff on imported automobiles equates to $100 billion. This figure represents nearly 14% of the sector’s annual revenue.
When spreading the $100 billion total cost of the tariffs across the approximately 16 million vehicles sold annually in the U.S., the additional expense per car amounts to roughly $6,250. This increase could lead to higher sticker prices for consumers, adding financial strain on buyers and potentially impacting overall vehicle sales.
Roeska also pointed out that the White House’s claim of generating $100 billion in revenue from the new auto tariffs appears to be inflated compared to their calculations. They suggested that the actual revenue collected from the duties may be lower than projected.
Impact on Auto Stocks
Bernstein analysts suggested that U.S.-based automakers could experience a lesser impact from the tariffs compared to their foreign competitors. On the other hand, companies such as Mitsubishi and JLR (Jaguar Land Rover), are expected to encounter a huge dent on profitability as they lack U.S. production.
In the pre-market trading on Thursday, U.S.-based General Motors (GM) tumbled over 6% while Ford (F) dropped 3%. Meanwhile, Japanese carmaker Toyota Motor (TM) stock is down 2% and Honda Motor declined over 2%.
Which Auto Stock Has a Buy Rating from Analysts?
Using the TipRanks Stock Comparison Tool, we have compared auto stocks on different parameters. Among these stocks, analysts have rated GM and BMW as Moderate Buy, while others have Hold consensus rating. In terms of share price appreciation, GM’s average price target of $63.53 suggests an upside of 25% from its current level.
