European carmakers opened sharply lower Thursday after US president Donald Trump announced blanket 25% tariffs on imports of foreign-made cars, effective April 2.
Mercedes Benz MBG fell the most among German OEMs, with shares plunging by more than 4% in early trading before rebounding to trade at -3% around midday. Volkswagen VOW3 traded 1.3% lower with BMW BMW down 1.8% and Porsche PAH3 down 3.6%. Stellantis STLAM declined 3.8% while France’s Renault RN0, which has minimal exposure to the US market, bucked the trend and traded slightly higher.
The shares of most US and Japanese automakers were also trading lower by mid-single digits on Wednesday’s news.
According to Trump, the tariffs will be “permanent,” apply to imports from all countries equally, and apply to both final vehicle imports and parts.
EU Set to Impose Reciprocal Tariffs
The EU is likely to impose reciprocal tariffs and will now assess this announcement, together with other measures the US is envisaging in the next days, said Ursula von der Leyen, president of the European Commission. “As I have said before, tariffs are taxes – bad for businesses, worse for consumers equally in the US and the European Union,” her statement following Trump’s announcement read.
Analyst Sees Negative Impact on Fair Values if Tariffs are Permanent
“As per our March 5 note, we expect a negative 20%-30% impact on our fair value estimates on a permanent tariff of this size”, said Morningstar equity analyst Rella Suskin. “For now though, we leave our valuations unchanged as we assess the likelihood of tariff permanence and the impact of likely reciprocal actions by the European Union. There is enough margin of safety at current prices for investors, as shares trade at deep discounts to our valuations.”
Most European automakers have been increasing their exposure to the US to offset muted growth in Europe and a significant decline in sales from China, Suskin said. “With new car prices likely to increase materially in the US, demand is expected to be dampened, negatively affecting the automakers’ growth-seeking geographic diversification strategy.”
European Exposure to US Sales Varies
BMW and Mercedes generate around a fourth of their sales from the US, according to Suskin. While about 50% of their US-sold vehicles are domestically assembled, most of the engines and transmissions are imported from Europe. This makes them USMCA-noncompliant. “Stellantis earns just under 50% of its revenue from the US, giving it greater exposure to the likely more restrained market demand going forward. We estimate around 60% of its US-sold vehicles are assembled domestically, with the remainder mostly manufactured in Mexico. Stellantis’s USMCA compliance means only the parts of the vehicles manufactured across the border will be levied,” she points out.
“The US only contributes a midteens percentage to the Volkswagen brand’s sales volumes currently. Its intention to meaningfully expand in the US is supported by construction, already underway, of a new manufacturing facility for its US-centric Scout brand expected to be launched in 2027. Volkswagen, in contrast to Mercedes and BMW, sources most of its engines and transmissions from within North America. Audi, Porsche, and Ferrari import 100% of their cars into the US. Renault has no sales exposure to the US.”
‘Watershed Moment’ for Europe’s Auto Industry
The European Automobile Manufacturers’ Association (ACEA) said it is deeply concerned by the announcement as it comes at a watershed moment for the industry’s transformation and as fierce international competition mounts. “European automakers have been investing in the US for decades, creating jobs, fostering economic growth in local communities, and generating massive tax revenue for the US government,” said ACEA Director General, Sigrid de Vries. “We urge President Trump to consider the negative impact of tariffs not only on global automakers but on US domestic manufacturing as well.”
Analysts at Stifel called the tariffs the worst-case scenario that everybody had been expecting. “While tariffs were expected, we still expect a clearly negative reaction: Consensus will decline, outlooks will be cut, efficiency will be lowered,” Stifel said in a research note Thursday.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
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