Little respite for carmakers despite Trump’s tariff rowback
Donald Trump’s rowback on tariffs provides little respite for a global car industry already struggling to cope.
Following intense lobbying from manufacturers, the mercurial US president on Tuesday introduced a set of relief measures for carmakers which enable them to pay less in import taxes for foreign parts.
While the move will be welcomed by the industry, it won’t be enough to take the pressure off.
Uncertainty is the name of the game and Chevrolet owner General Motors yesterday joined a growing list of car companies refraining from providing guidance for the year ahead.
The automotive giant has since been joined by its European counterparts Mercedes-Benz and Stellantis, while Volkswagen on Wednesday revealed quarterly results which included a hefty drop in profit.
British luxury brand Aston Martin was an outlier this week in holding annual guidance. But headline coverage focused on an announcement of plans to limit deliveries to the US amid widening losses.
Like Spaghetti Junction at rush hour
The impact of Trump’s liberation day levies is clearly already set to be long lasting. However, the real issue for the sector is just how much else it has to deal with.
“The difficulty for the automotive space is tariffs have been ladled on top of an existing soup of problems which were already proving difficult to digest,” Russ Mould, investment director at AJ Bell, said.
Top of the list is the ongoing transition to electric vehicles (EV), which has made it impossible for manufacturers to make long-term plans against a backdrop of ever-changing policy across Europe, the US and the UK.
Demand for electric models, which are pricier than their combustion engine counterparts, has been constrained by weak consumer confidence and pressure on household finances amid a volatile economic backdrop since the pandemic.
In the UK, successive governments have consistently chopped and changed their approach to policies seeking to implement a ban on new petrol and diesel sales in the 2030s.
Traditional carmakers have also struggled amid a price war with rapidly-growing Chinese competitors such as BYD and MD, whose cheaper EV models are flooding the European market.
Mould described the set of challenges as “as daunting as facing Spaghetti Junction at rush hour” and said further consolidation through the industry was likely.
“Further consolidation seems likely as firms look to steer a course through a set of challenges which look as daunting as facing Spaghetti Junction at rush hour.”