Auto Stocks Slump Globally as Trump Tariffs Threaten Sales
Amidst US President Donald Trump's newly imposed tariffs on goods from Mexico and Canada, global auto stocks have witnessed a significant decline. These tariffs, set to take effect on Tuesday, have raised concerns over disrupted supply chains and reduced sales potential for carmakers with manufacturing operations in Mexico and Canada.
Key automakers in Asia, such as Toyota Motor Corp. and Nissan Motor Co., experienced stock drops during trading. In Europe, Volkswagen AG and Stellantis NV led the steepest intraday decline since April. US markets also reflected the downturn, with General Motors Co. and Ford Motor Co. facing losses in premarket trading.
The 25% tariffs on Mexican and Canadian goods cast uncertainty over established supply chains, particularly those utilized by global carmakers for exporting to the US market. German auto suppliers maintain over 330 sites in Mexico, while Mexican automakers operate multiple factories that produced over 716,000 passenger vehicles in 2023.
These tariffs exacerbate existing challenges for carmakers facing diminished demand in key markets, particularly for electric vehicles, and growing competition from Chinese manufacturers. European auto makers and parts suppliers have experienced an approximate 12% stock index decline over the past year.
VW, which produced over 500,000 vehicles in Mexico last year, reported a 6.7% stock loss. Stellantis, the second-largest European producer in Mexico, saw its stock decline by 7%. Toyota's stock closed down 5%, while Nissan faced a plunge of up to 10% before mitigating losses.
In the US pre-market, electric vehicle companies such as Tesla, Rivian, and Lucid joined the decline. Shares of luxury car manufacturers BMW AG and Mercedes-Benz Group AG fell by 6.5% and 5.3%, respectively.
BMW employs around 3,700 individuals at its San Luis Potosi plant, where 95,151 vehicles were produced last year. Valeo SE and Forvia SE are anticipated to be amongst the most significantly affected auto parts suppliers.
"Tariffs on cars sold in the US but manufactured outside of it directly impact manufacturers' profitability," explained Union Investment portfolio manager Moritz Kronenberger. "Prices are likely to rise by thousands of dollars to compensate for tariffs, ultimately affecting sales volume."
Daimler Truck Holding AG shares declined by 5.8%. The German firm's Freightliner brand holds a leading position in the US truck market, selling approximately 90,000 vehicles annually. A substantial portion of Freightliner trucks destined for the US market are produced in Mexican plants.
Oddo BHF analyst Michael Foundoukidis asserted that Renault SA is one of the least exposed European car stocks to the tariffs on Mexico and Canada. Renault shares experienced a 4% decrease.