Investing.com -- U.S. president Donald Trump’s latest announcement of reciprocal tariffs has reignited investor concerns about the auto sector, with Bernstein warning of growing risks to both U.S. and European manufacturers.
While vehicle imports were spared in the latest round, a wide-reaching set of parts tariffs scheduled to begin on May 3 poses a significant threat to industry earnings.
The U.S. will impose a baseline 10% tariff on all countries from April 5, with additional duties of up to 34% for selected partners, including 20% for the European Union.
Although vehicles and parts are excluded from these reciprocal tariffs, the new list of auto parts covered by earlier measures is broader than anticipated. Bernstein analysts believe this increases the likelihood that parts tariffs “will go into effect on May 3rd, which presents a substantial downside risk for all U.S. automotive stocks.”
Shares of U.S. automakers have begun to reflect some of the uncertainty. Ford’s stock has remained relatively stable, but Bernstein sees “significant downside risk to the company’s ‘25 and ‘26 earnings.”
GM, which has dropped around 10% since the initial tariff news, remains vulnerable due to low domestic content in its U.S.-sold vehicles.
Rivian (NASDAQ:RIVN) is seen as particularly exposed, given that it sources lithium-ion batteries from South Korea—now subject to a 25% parts tariff—which could hinder future financing plans.
“This will prove a severe headwind for Rivian, which could prevent the company from unlocking the next financing round from Volkswagen (ETR:VOWG_p), which is dependent on Rivian’s profitability in 2025,” analysts led by Daniel Roeska said in a note.
Polestar (NASDAQ:PSNY) may face an even more immediate strategic decision. With its plan to use the South Korea-U.S. free trade agreement now ineffective and rising costs for content from China and Europe, the company “will ultimately have to decide, whether it exits the U.S. market as long as tariffs stay in place.”
In Europe, the market had shown resilience following the March 26 announcement of a 25% import tariff on vehicles, with sector stocks falling only about 7% since.
But Bernstein argues the latest set of measures “ dispels those hopes,” and notes that manufacturers like BMW (ETR:BMWG) and Mercedes Benz Group (ETR:MBGn) could see margin hits of 2.0 and 2.2 percentage points, respectively. Volkswagen is expected to fare slightly better, with a 1.4-point impact.
European carmakers are expected to respond by ramping up U.S. production using existing plants and shift work, potentially adding 50,000 units per year for BMW in South Carolina and Mercedes in Alabama.
However, Bernstein does not expect new investments or capacity expansions, suggesting the response will remain tactical rather than structural.
