Trump's tariffs could cost carmakers up to 17% of combined core profits, S&P says

Hyundai

29/11/2024 12:09

Nov 29 (Reuters) - European and American carmakers are
set to lose up to 17% of their combined annual core profits if
the U.S. imposes import tariffs on Europe, Mexico and Canada,
S&P Global said in a report on Friday, warning of potential
credit downgrades.
    Premium automakers Volvo  VOLVb.ST  and Jaguar Land Rover,
who mostly produce in Europe, and groups General Motors  GM.N 
and Stellantis  STLAM.MI , who assemble high volumes of cars in
Mexico and Canada, are most exposed to the threat of higher
tariffs, S&P said. 
    
    WHY IT'S IMPORTANT
    President-elect Donald Trump on Monday said he would impose
a 25% duty on imports from Canada and Mexico until they clamped
down on drugs and migrants crossing the border, a move that
would appear to violate a free-trade deal between the three
countries.
    Analysts and experts fear the tariffs could be more damaging
for European car makers like Volkswagen  VOWG_p.DE  and
Stellantis and their suppliers than any direct tariffs on EU
goods.

    KEY QUOTES
    "We expect mitigating actions will make potentially higher
tariffs manageable, but the combined effects of tariffs, tighter
CO2 regulation in Europe from 2025, and earnings pressure from
stronger competition in China and Europe could increase the risk
of downgrades", S&P said.
    "Rating transitions could occur where the tariffs compound
other headwinds for 2025," it added.

    CONTEXT
    Starting in 2025, the EU will lower a cap on average
emissions from new vehicle sales to 94 grams/km from 116 g/km. 

    BY THE NUMBERS
    S&P said a worst-case scenario for automakers includes a 20%
tariff on U.S. light vehicle imports from the EU and the UK, and
a 25% tariff on imports from Mexico and Canada.
    In this scenario, GM, Stellantis, Volvo and Jaguar Land
Rover could see more than 20% of their projected adjusted EBITDA
at risk in 2025, in S&P analysis.
    The risk is between 10% and 20% for Volkswagen  VOWG_p.DE 
and Toyota  7203.T , and below 10% for BMW  BMWG.DE , Ford
 F.N , Mercedes-Benz  MBGn.DE  and Hyundai  011760.KS .

 (Reporting by Alessandro Parodi in Gdansk, editing by)
 ((Alessandro.Parodi@thomsonreuters.com;))