- President Donald Trump's 25 percent tariffs on imported vehicles and parts are expected to disrupt the global auto industry, raising U.S. vehicle prices by $5,000 to $15,000 and squeezing automaker profits.
- Shares of Ford, GM and Stellantis fell three percent to eight percent (March 27), while Tesla's stock rose two percent due to its strong U.S. production footprint and local sourcing.
- Analysts (JPMorgan, CFRA) highlight Tesla as the "least exposed" to tariffs, given its high domestic production and sourcing, though CEO Elon Musk warns of "significant" cost impacts from imported parts.
- Despite Tesla's efforts to localize, some parts remain "difficult or impossible" to source domestically (e.g., components from Mexico), affecting profitability.
- Even U.S. automakers face higher costs due to North American supply chains, with UBS noting compliance complexities for parts under free-trade agreements.
As the global auto industry braces for the impact of President Donald Trump's new 25 percent tariffs on imported vehicles and parts, Tesla has emerged as one of the few automakers to weather the storm, at least in the United States.
According to several reports, the 25 percent tariffs are anticipated to disrupt the global automotive sector, drive up vehicle prices in the U.S. by $5,000 to $15,000 if fully passed to consumers and squeeze profits of automakers. In line with this, shares of Ford, General Motors and Stellantis (Chrysler's parent company) fell from three percent to eight percent on March 27.
Even domestic automakers face risks, as their supply chains span North America, leaving them vulnerable to higher costs.
"There are still a lot of unknowns, but if this remains in place, there will clearly be some pain for the companies to digest," said UBS analyst Joseph Spak, noting challenges in tracking parts that comply with free-trade agreements but aren't fully U.S.-made. (Related: Tariffs can end globalism (but they come with a cost).)
However, Tesla, which manufactures the majority of its vehicles domestically, rose its stock by about two percent that same day.
"Tesla is a relative beneficiary given 100 percent U.S. production footprint, substantial U.S. sourcing and with Model Y competing in a midsize crossover segment where close to 50 percent of vehicles could be subject to tariffs," TD Cowen analysts said.
Musk claims the new auto tariffs still have a "significant" impact on Tesla
In line with this, analysts at JPMorgan and CFRA predict Tesla will be among the least-affected automakers, alongside Rivian.
"We consider Tesla the least exposed to the tariffs, noting that it was named the 'most American-made car company' from 2022 to 2024 by Cars.com (CARS)," CFRA analyst Garrett Nelson said on March 25.
However, Tesla CEO Elon Musk still warned that Trump's new auto tariffs will have a "significant" impact on the electric vehicle (EV) maker, despite claims that domestic manufacturers would be shielded.
"Important to note that Tesla is NOT unscathed here," Musk posted on X, formerly known as Twitter. "To be clear, this will affect the price of parts in Tesla cars that come from other countries. The cost impact is not trivial," he added in another post.
Tesla has worked to localize its supply chain, but the company still relies on foreign-sourced components. In a recent letter to the U.S. Trade Representative (USTR), Tesla stated that some parts remain "difficult or impossible" to source domestically, despite "aggressive" efforts. The Austin-based automaker urged the USTR to consider the downstream effects of the tariffs.
Moreover, Tesla CFO Vaibhav Taneja previously warned on an earnings call in January that tariffs would hurt the company's profitability.
According to the National Highway Traffic Safety Administration, 60 percent to 75 percent of parts in Tesla's EVs are U.S.-made, though this varies by model. Like other automakers, Tesla sources components such as body panels and headlamps from Mexican suppliers. Mexico exported over $182 billion worth of vehicles, engines and auto parts to the U.S. in 2023.
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