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Investing.com -- European auto shares fell on Thursday following the imposition of new U.S. tariffs. President Donald Trump’s administration has enacted a 25% tariff on all auto imports to the United States, leading to increased costs and potential disruptions in industry supply chains.
The Stoxx Europe 600 Automotive & Parts subindex fell by 1.9%, with significant drops for major companies such as Valeo (EPA:VLOF) (-4.1%), D’ieteren Group (-2.7%), Michelin (EPA:MICP) (-2.1%), Porsche SE (-2.1%), Renault (EPA:RENA) (-2.6%), Mercedes (-2.2%), BMW (ETR:BMWG) (-2.1%), Ferrari (BIT:RACE) (-1.7%), Volkswagen (ETR:VOWG_p) (-1.7%), Continental (-1.6%), Porsche AG (-2%) and Stellantis (NYSE:STLA) (-0.9%).
"We have highlighted in numerous notes that we believe prices will need to increase as much as 20%, which will crimp demand by as much as 3mm+," BofA analysts wrote in a note.
"In addition, there are likely to be production stoppages due to OEMs, Tier 1 suppliers, or lower Tier suppliers’ failure or logical decision to halt now uneconomic products (vehicles and parts)."
Barclays (LON:BARC) analysts have noted that while a worst-case scenario was avoided with the sector being exempt from reciprocal tariffs, the impact of the new U.S. tariffs is not yet fully accounted for in the automakers’ valuations. They also pointed out that the uncertainty and weaker sector setup are not fully reflected in valuations or fundamentals.
Moreover, reports indicated that Mercedes is considering removing its least expensive cars from the U.S. market due to the tariffs, while Volkswagen plans to pass on the import fees to the prices of vehicles shipped to the U.S.
Citi analysts provided insight into the potential financial ramifications, suggesting that the net Ebit impact of the tariffs could be around €10 billion, split between FY25 and FY26, equating to a roughly 100bps margin impact for the European OEM group each year.
Porsche and Stellantis are seen as carrying the "largest Ebit risks," followed by Mercedes and BMW, while Volkswagen and Renault are Citi’s top buy picks for FY25.