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The auto industry could suffer a severe financial blow if the United States imposes new import tariffs on vehicles from Europe, Mexico and Canada.
According to a report by S&P Global, these tariffs could reduce the combined core profits of major European and US manufacturers by up to 17%, threatening their financial stability and credit ratings.
Manufacturers in the spotlight: the most exposed
Luxury manufacturers such as Volvo and Jaguar Land Rover, which operate mostly in Europe, would be among the hardest hit. For their part, companies such as General Motors and Stellantis, which assemble vehicles in Mexico and Canada, also face significant risks.
President-elect Donald Trump recently announced a plan to impose a 25% tariff on imports from Canada and Mexico.
This measure seeks to pressure both countries to reduce drug trafficking and control migration at the border. However, the decision could violate free trade agreements established between these nations.
Europe and China: markets under full pressure
European manufacturers like Volkswagen and Stellantis would face not only US tariffs but also additional challenges in their key markets. In Europe, regulation on CO2 emissions will be tightened in 2025, reducing the average limit of permitted emissions from 116 grams per kilometer to 94 grams.
Stellantis NV is a group of multinational companies in the automotive industry based in Amsterdam, Netherlands. We see how its stock graph already reflects, in the last month, the possible impact: since the second week of this month behaves in a bearish manner. Source: Google Finance
In parallel, growing competition in China, the world’s largest automotive market, is reducing profit margins. This combination of factors could amplify the impact of tariffs and put the financial viability of these manufacturers at risk.
Actions necessary to mitigate repercussions
Although S&P anticipates that manufacturers will adopt mitigation strategies to handle the new tariffs, these will not be enough on their own. The agency warns that the combined effects of tariffs, stricter environmental regulations and global competition could lead to a significant reduction in revenue.
“Credit rating transitions are inevitable if tariffs exacerbate other financial challenges in 2025,” the S&P report stated.
Additionally, manufacturers could seek to diversify their supply chains, relocate production plants and renegotiate commercial terms. However, these measures require time and significant investment, which adds pressure to your financial structure.
The numbers behind the impact
In a worst-case scenario, tariffs would include 20% for vehicles imported from Europe and the United Kingdom, and 25% from Mexico and Canada. Under these conditions, the most exposed manufacturers would be General Motors, Stellantis, Volvo and Jaguar Land Rover. These could lose more than 20% of their projected adjusted EBITDA by 2025.
Other manufacturers, such as Volkswagen and Toyota, would face a moderate financial risk, between 10% and 20%. Companies such as BMW, Ford, Mercedes-Benz and Hyundai would be less vulnerable, with risks below 10%.
A global blow to the industry
The impact is not just limited to automakers. Parts suppliers, especially those dependent on transatlantic and North American trade, will also face disruptions to their supply chains. This could translate into cost increases that would be passed on to consumers.
Furthermore, uncertainty over trade policies could discourage investment in innovation, delaying technological advances crucial for the transition to electric and sustainable vehicles.
Conclusion: an industry on the tightrope?
The possible imposition of tariffs by the United States not only threatens to weaken automakers, but could also destabilize the entire global industry.
With stricter environmental regulations in Europe, fierce competition in China and financial margins at risk, manufacturers need to take proactive steps to adapt.
The outlook is uncertain, but S&P’s message is clear: survival will depend on the ability of companies to innovate, diversify and confront these challenges strategically.
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