Q&A – Auto Tariffs – What are the Most & Least Impacted Cars?
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Today’s Entry: @brianmuddradio The stocks of American auto companies are being sold off on the tariff news too. Are there any companies that won’t be impacted?
Bottom Line: Thursday is the day that President Trump’s recently announced 25% automotive tariffs are set to take effect. As his administration's fact sheet outlined...
- The 25% tariff will be applied to imported passenger vehicles (sedans, SUVs, crossovers, minivans, cargo vans) and light trucks, as well as key automobile parts (engines, transmissions, powertrain parts, and electrical components), with processes to expand tariffs on additional parts if necessary.
Of all of Trump’s tariffs this is the one that will have the greatest effect because for most people a vehicle is the second largest purchase you’ll make. The average purchase price of a new vehicle just recently reached a record of $49,740. If the 25% tariff were directly passed along to consumers, the average cost of a new vehicle would be approximately $6,218 higher – for a total cost of over $55k per vehicle. If that number sounds weird (because it’s not 25%) it’s based on the percentage of imported vehicles that are purchased which right now stands at almost exactly half. But it’s not necessarily that easy. And that’s because even American made cars, aren’t entirely American made cars.
Approximately 60% of all car parts used in the United States, come from outside of the United States. For that reason, there’s no such thing as a mass manufactured completely American made car. And specific to the point of today’s note – the automotive companies you’re most likely to associate as being American automotive companies, aren’t at the top of the pack for American manufacturing. In fact, two of the so-called “big three” are among the most impacted by the soon-to-be tariffs.
The two least impacted companies are Tesla and Rivian. That’s due to all their vehicles sold in the US being manufactured in the US. They still have parts, primarily for electric batteries, that come from outside the U.S. but that’s it in terms of the impact – so it’s minimal for them. The third least impacted company is Honda. 70% of Honda’s vehicles that are sold in the U.S. are manufactured in the US as are 100% of Honda’s Acura brand. As a result, Honda also has the largest lineup of “made-in-America" cars.
Ford is the first of the traditional “big three” American car companies to show up as it ranks 4th overall with 80% of its vehicles that are assembled in the U.S. And as for GM... It’s actually among the most impacted as most of its vehicles are imported.
Here's how car companies rank in terms of the percentage of autos manufactured in the U.S.
- Tesla & Rivian: 100%
- Honda: 81%
- Ford: 80%
- Stellantis (and all its brands Chrysler, Dodge, Jeep, etc.): 74%
- Nissan: 73%
- Mercedes & Volkswagen (w/Porsche): 57%
- BMW & Toyota: 52%
- General Motors: 45%
- Hyundai-Kia: 33%
- Mazda: 19%
- Volvo: 13%
Surprised? That breakout illustrates two points. First, the perception about what an American automobile is and what vehicles actually are mostly American made are probably two different things. Second, the impact is likely to be felt pretty much across the board but with uneven impacts. President Trump’s goal with the tariff announcement is two-fold. First, to encourage more American manufacturing of vehicles and second, for other countries to drop the tariffs they impose of American vehicles sold in their countries.
The bottom line is that costs are likely to be minimal at most for Tesla and Rivian, with average cost increases, if passed along to the consumer, pacing about $6,200 for the other manufacturers with some obviously more impacted than others.