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(Bloomberg) — Volkswagen AG (VOW3.DE) and Stellantis NV (STLA) led the steepest intraday decline in European auto shares since April as US President Donald Trump’s new tariffs promised to cut into sales from their factories in Mexico.
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VW, which exported more than 500,000 vehicles last year to the US from Mexico, fell 6.7% in early trading, while Stellantis, the next biggest European producer there, declined 7%.
Trump’s 25% tariffs on goods from Mexico and Canada, set to start Tuesday, are throwing decades-old supply chains into question, particularly for carmakers from around the globe that have set up manufacturing hubs in Mexico, largely to supply the US market. German auto suppliers operate more than 330 sites in Mexico, while the country’s automakers own several factories there that produced 716,000 passenger cars in 2023.
The levies add to an already difficult time for carmakers that are grappling with weaker demand in key markets, especially for electric vehicles, and intensifying competition from Chinese manufacturers. A stock index of European auto makers and parts suppliers has fallen about 12% in the past year.
Shares of luxury-car makers BMW AG and Mercedes-Benz Group AG also fell 6.5% and 5.3%, respectively. BMW, which employs about 3,700 workers at its plant in San Luis Potosi, exported 95,151 vehicles to the US from Mexico last year.
As for auto parts suppliers, Valeo SE (FR.PA, FRP.XC) and Forvia SE (FRVIA.PA, FAU.F) are likely to be among the hardest hit, according to Oddo BHF analysts led by Michael Foundoukidis. Valeo shares fell 9%, while Forvia declined 13%.
VW exported 526,535 vehicles to the US from Mexico last year, according to Mexico’s statistics agency. The company has major manufacturing sites in places including Puebla and San Jose Chiapa, and employs thousands of workers there.
“Import tariffs on cars sold in the U.S. but produced outside of the US have direct consequences on the profitability of manufacturers,” Moritz Kronenberger, a portfolio manager at Union Investment, said in an email. “Prices are expected to rise by several thousand dollars to offset the tariffs, which will in turn impact sales volume.”
Daimler Truck Holding AG shares tumbled 5.8% on Germany’s DAX (^GDAXI) index after the tariff announcement. The German firm’s Freightliner brand leads the US truck market, selling about 90,000 vehicles annually. The company builds a large share of its US-bound Freightliner trucks in Mexico, with plants in Santiago Tianguistenco and Saltillo, Coahuila. It also operates parts distribution centers in Canada and Mexico.