Automakers Struggle as Tariffs Loom
Following President Trump's announcement of tariffs on goods from Canada and Mexico, automakers saw their stocks plummet on Monday.
Major Automakers Affected
GM (GM), Ford (F), Stellantis (STLA), Toyota (TM), and Honda (HMC) all experienced significant declines, with losses exceeding 2%. Tesla (TSLA), despite having no manufacturing operations in Canada or Mexico, also saw its stock drop by 5.2%, likely due to its reliance on parts sourced from these regions.
Canada and Mexico's Role in Car Manufacturing
Canada accounts for approximately 10% of cars sold in the US, while Mexico supplies close to 20%. GM produces pickups in all three countries, while Ford sources pickups, SUVs, and EVs from Mexico. Stellantis manufactures minivans and EVs in Canada.
The Impact on GM
GM has stated that it is working to mitigate the impact of tariffs. CEO Mary Barra indicated that the company has the capacity to shift production from Mexico and Canada to the US.
Auto Parts Supply Chain Affected
Auto parts could pose a significant challenge for automakers. Mexico's INA trade group estimates that 52.3% of its auto parts exports go to the US. A report by Alix Partners indicates that US and Canadian parts and components totaled $224 billion in 2024.
Consumer Impact
Higher parts costs will inevitably lead to increased prices for US-built vehicles, which will likely be passed on to consumers. Estimates suggest that the average retail car price could rise by $3,000.
Timeframe and Challenges
The short timeframe before tariffs take effect on Mexico leaves suppliers and manufacturers with insufficient time to adjust. The automotive industry emphasizes that it cannot adapt quickly to such sudden policy changes.