President Donald Trump’s new 25% tariffs on imported passenger vehicles, which analysts at JP Morgan have called “draconian,” sent shares of Ford, GM, and Stellantis plummeting Thursday morning.
While there are still unknowns about how the rules will be enforced, there’s one clear winner: Tesla. The EV maker’s stock shot up by 4% in trading on Thursday.
So why are tariffs, which Wall Street believes could cost the auto industry as much as $82 billion and slash earnings at Detroit’s Big Three by up to 60%, such a potential boon for Tesla?
Despite its global manufacturing footprint, including assembly plants in Germany and China, Tesla’s vehicles sold in the US are made domestically at its factories in California and Texas.
The Model Y SUV, Tesla’s most popular product, will be a big beneficiary of that US production, as close to 50% of its rivals could be subject to tariffs, TD Cowen analysts said in a note to clients.
Competitors like Ford and GM could see an additional $4,000 to $5,000 of input costs per vehicle when the tariffs take effect on April 3, UBS analysts estimated.
While previously proposed auto tariffs covered primarily imports from Mexico, Canada, and China, the Trump administration has now expanded the scope to include imports from all countries, with some carve-outs for parts covered under the USCMA trade agreement.
As are result, Chevrolets and Buicks from South Korea and Dodges from Italy are now subject to 25% tariffs. That’s on top of the tariffs on non-US-produced vehicles from foreign automakers.
It’s all likely welcome news for Tesla, which is facing declining sales and pushback against CEO Elon Musk‘s highly visible role within the Trump Administration.
Trump has been a supporter of the brand and publicly announced the purchase of a new Tesla Model S sedan at a White House press event with Musk earlier in March.
However, Trump said he did not consult Musk on the auto tariff out of concern there may be a conflict of interest.
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