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Investing.com -- U.S. President Donald Trump’s newly confirmed 25% global tariffs on foreign autos and parts are set to disrupt the global automotive landscape, triggering production shifts, halting asset sales, and pressuring margins across regions.
Analysts at JPMorgan expect widespread earnings downgrades and strategic adjustments as companies react to what they call “a net negative for the earnings momentum” of the automakers.
European and Japanese automakers appear especially vulnerable. Analysts forecast average earnings cuts of around 30% for Toyota (NYSE:TM), Honda (NYSE:HMC), and most EU OEMs, excluding Volvo (ST:VOLVb).
German automakers and Stellantis (NYSE:STLA) face ~25% reductions in fiscal year 2025 (FY25) earnings projections, driven largely by vehicle exports to the U.S. that are now subject to the full tariff.
Mass-market automakers are expected to struggle to pass on higher costs, unlike premium and luxury brands that may preserve margins through price increases. General Motors Company (NYSE:GM) and Ford face differing exposures, with GM “worst positioned of all companies in our coverage,” according to JPMorgan analysts.
The carmaker imports about 40% of its U.S. vehicle sales from Canada and Mexico, compared to just 7% for Ford. Analysts estimate GM’s total tariff cost could reach $13 billion, while Ford’s may rise to $4.5 billion.
Meanwhile, the pressure on U.S. truckmakers is compounded by softening demand. “Order intake in North America has been slowing over the past few months owing to the economic uncertainty created by the U.S. tariff negotiations,” analysts noted, expecting this to weigh on Q2 results.
In response to the new tariffs, automakers are accelerating localization efforts. Honda is shifting Civic hybrid production from Mexico to Indiana.
Volvo Cars is expanding output in South Carolina. Mercedes Benz (ETR:MBGn) is considering U.S. production shifts, while Volkswagen (ETR:VOWG_p) has paused imports and is working on long-term backup plans.
Asian and Latin American suppliers are also adjusting. Tariffs on key auto parts, including transmissions and engines, are likely to be felt unevenly, with suppliers like Aptiv (NYSE:APTV) seen as more vulnerable.
On the other hand, JPMorgan sees Brazil-based parts firms relatively well-positioned, given their exposure to heavy vehicles and exemptions under the USMCA.
Although OEMs are generally well-capitalized, with ~15% net cash to sales ratios, the Wall Street firm warns that “production stoppages and high levels of inventory in transit” may strain balance sheets and force delays in share buybacks and dividends in the first half.