Yahoo Finance

Well, as President Trump threatens tariffs on European luxury goods, European automakers are preparing to respond. Joining us now, Yahoo Finance's Pras Subramanian. We talked earlier about champagne and wine. We got to talk about luxury cars, too.

I mean, it's all in the same boat, right? These luxury type items and, you know, champagne dreams are turning into nightmares for European automakers. So, we're seeing how some of them are going to respond. So, Ferrari, uh, CEO Benedict Vigna was at a conference. They talked about how they're readying countermeasures for this. Didn't say what that means, but we can surmise two things: raise prices or eat the costs. And for Ferrari, with high margins, you could probably maybe eat a little bit of that or pass some of that on, but we know wealthy people don't want to pay more than they actually have to pay, right? So, that's that's one sort of thing. But, with Porsche, interesting. They said that they basically yesterday during their their, um, earnings results that they're going to pass on the costs. They're going to look at pricing options for their, for their supposed loyal customers. So, we'll see how that how that goes for them. Uh, and then BMW, look, some of these companies make stuff, make cars in also Mexico as well as Germany or other parts of Europe, and and they said that they would actually price protect the cars coming from Mexico. They price protect them, uh, to through May 1st, meaning they would eat the entire cost to keep the price the same. If things go on beyond that, they'll look to re-evaluate, but that's what they're going to do so far. So, you know, a mix of things that European automakers are going to do to try to respond to Trump's tariff threats.

It'll be interesting to watch for those who decide like, "Okay, I'm not going to eat this margin. I'm going to pass it along," how they pass it along. Like, do they decide ultimately, Pras, "Okay, we're going to raise prices on, on a few models or just, "Hey, the entire fleet?" How that kind of plays out will be interesting to watch.

Yeah, I mean, I think it'll probably be the the models that are most that are, uh, that are being tariffed, right? But you see, you could spread it out across what. But I I talked to some experts talking about how like, you might not have incentives for certain cars. You might keep the MSRP the same. No incentives anymore as a way to keep some of that margin. So, there's various ways that they can do this without having to really up the sticker price on the car, uh, but I think it's a good point that they could actually spread it across multiple cars that aren't even tariffed, uh, in order to support those cars that are. Usually, those are cheaper cars that come in from, let's say, Mexico. But in this case, Maranello, Ferrari, some Porsche vehicles, they're not they're not cheap.

Right. But they're also, I would think their customers are also less price sensitive. Like I think about a mid-market BMW. That that customer is going to be slightly more price sensitive than someone who's buying a Ferrari, for example.

Yes, definitely. Because with BMW of Audi, you have even Cadillac, you have Lexus, you have even Tesla. You have a lot of different options, whereas Ferrari, there's only one Ferrari. I mean, you might go to Lamborghini, but those are two different

You could argue Porsche is is similar.

Yes, yes, definitely. Um, not at that level, but still a luxury brand in that subset. So, yes, what's your substitution level? What can you get away with? What can you afford? What do you how badly do you really want it? Uh, when you're Ferrari selling selling 10,000 cars a year, uh, maybe people really want it, so then they'll pay the extra money for it.