Al Root

With more tariff certainty, investors, with some help from Wall Street, can better assess the impact levies have on auto makers and new car demand.

The impact is still significant. The U.S. domestic industry, however, might be in better shape than investors suspect. Tesla is in the best position of any car company, followed by Ford Motor. German auto makers have the biggest problem.

In late April, after heavy lobbying by the industry, President Donald Trump modified his auto tariff policies. There is still a 25% tariff on imported vehicles, but there was some relief on imported parts. What's more, auto tariffs don't stack on top of other tariffs related to things such as fentanyl or steel and aluminum.

As a result of the changes, Guggenheim analyst Ronald Jewsikow cut his estimate for per-car tariff impacts from an average of more than $6,000 per vehicle to a little more than $3,000. That increase is about 6% of the average car price. That doesn't mean car prices will rise by 6%, though. Suppliers and auto makers will absorb some of the impacts.

The per unit cost varies widely by model and by auto maker. Cost increases can be as high as 17% for some models and as low as zero.

Overall, Jewsikow projects zero cost increases for Tesla. It manufactures all the cars it sells domestically, and the parts credits should be enough to mitigate tariffs on non-USMCA-compliant parts. Ford and General Motors are expected to see per unit cost increases of $1,277 and $1,866, respectively.

Ford imports about 20% of its volume. GM imports closer to 40%. Stellantis and Honda Motor also have average impacts of less than $2,000 per vehicle. German auto makers have the most significant impact. Volkswagen, BMW, and Mercedes-Benz face per-unit cost headwinds of $5,941, $8,237, and $11,894, respectively.

"We were surprised by the limited tariffs projected for Stellantis and Honda, and the magnitude of tariff costs on a per-unit basis for certain import brands, particularly the large luxury brands," wrote Jewsikow in a Wednesday report.

The impact on domestic auto makers looks to be manageable. Still, higher costs will result in almost one million fewer cars sold in 2025, he adds. Jewsikow forecasts just under 15 million new cars sold in the U.S. this year, down from a prior forecast of about 15.5 million and down from about 16 million sold in 2024.

Exactly what company will lose the volume is hard to say. It's likely to come from auto makers facing steeper cost increases, which would be another positive for domestic auto makers.

Coming into Wednesday's trading, shares of Ford were flat since the Nov. 5 presidential election, while the S&P 500 was up about 2%. GM and Stellantis shares were down 6% and 21%, respectively.

News other than tariffs can move stock prices, but the declines for GM and Stellantis might be a little overdone, given Guggenhiem's insights.

Tesla stock was up 33% since the election, but a lot more than tariffs move shares of Elon Musk's car company.

Write to Al Root at allen.root@dowjones.com

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May 14, 2025 08:34 ET (12:34 GMT)

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