By: Matt @ Home & Pocket
March 28, 2025
On March 27, 2025, President Trump announced new tariffs on cars and auto parts, potentially shaking up the automotive industry in the U.S. and globally. These tariffs could have far-reaching effects on manufacturers, depending on where and how their vehicles and parts are produced.
As investors assess the impact of these tariffs, understanding how individual companies will be affected is crucial for long-term investment strategies. Here’s a closer look at how the new tariffs will affect major automakers and what investors should consider when looking at these stocks for the long haul.
Tesla (TSLA): Minimal Exposure, but Political Headwinds Ahead
Stock Ticker: TSLA
Tesla is likely one of the least exposed to the new tariffs. The company manufactures the majority of its vehicles in the U.S., with production facilities in California and Texas, which helps it avoid the brunt of tariffs on imported vehicles. However, around 25% of Tesla’s car parts are sourced from abroad, making it somewhat vulnerable to higher costs due to tariff-induced price hikes on imported components.
Despite this, Tesla faces other challenges. Its sales are starting to decline globally, partly due to Elon Musk’s controversial political statements and actions, which have alienated some of the moderate and liberal buyers. Countries could retaliate by imposing penalties on Tesla specifically, as seen with Canadian provinces withdrawing incentives for the purchase of Tesla vehicles.
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Investment Strategy: For investors, Tesla’s stock is more volatile than many traditional automakers, and the tariffs could add some short-term unpredictability to its performance. However, Tesla remains the leader in electric vehicle innovation and has strong brand loyalty. If you’re a long-term investor, it may be wise to look at short-term price fluctuations as buying opportunities, while keeping an eye on global market dynamics and Musk’s influence on the company’s sales.
General Motors (GM): Strong Finances, but Vulnerable to Tariffs
Stock Ticker: GM
General Motors imports a significant percentage of its vehicles, with many of its popular models like the Chevrolet Silverado manufactured in Mexico. This makes GM particularly vulnerable to the 25% tariffs on imported vehicles. In fact, about 40% of GM’s sales in the U.S. last year came from vehicles assembled abroad.
Despite this exposure, GM has posted strong profits in recent years and is considered to be on solid financial footing. This could help the company weather the potential impacts of these tariffs better than other automakers, especially if President Trump takes steps to ease or remove them in the future.
Investment Strategy: For long-term investors, GM offers a relatively stable investment. The company’s strong financial position and diversified product lineup mean it can weather economic turbulence better than many competitors. It is also expanding its electric vehicle offerings, which could provide future growth as the market shifts toward cleaner energy. Investors should watch the tariff situation closely, but GM’s stability and future EV growth make it an attractive stock for those seeking steady returns.
Ford Motor (F): Relatively Insulated, but Struggling with EVs
Stock Ticker: F
Ford is somewhat insulated from the impact of the new tariffs since it manufactures 80% of the vehicles it sells in the U.S. However, it still depends on foreign factories for parts, such as engines made in Ontario, Canada. In addition, Ford is facing significant financial challenges in its electric vehicle (EV) division, losing billions of dollars in this area.
One of Ford’s major EVs, the Mustang Mach-E, is produced in Mexico, meaning it could be affected by the import taxes. While Ford is aggressively pursuing growth in the EV space, it has yet to turn a profit on these models, which puts it at risk if the market doesn’t respond positively.
Investment Strategy: For long-term investors, Ford is a relatively safe bet due to its strong presence in the U.S. market and the ongoing shift toward electric vehicles. However, investors should remain cautious, as the company’s current struggles with EVs could impact its stock price. If Ford can successfully transition to a more profitable EV future, it will likely see long-term growth, but for now, there is some uncertainty.
Stellantis (STLA): Facing Operational Challenges
Stock Ticker: STLA
Stellantis, the parent company of Chrysler, Dodge, Jeep, and Ram, is particularly vulnerable to the tariffs, as it relies heavily on overseas factories in Mexico for the production of several popular models. The company is also grappling with sluggish sales and is in the process of searching for a new CEO. These challenges, combined with potential tariffs, make Stellantis one of the automakers at greater risk, especially if the tariffs remain in place for months or years.
Investment Strategy: Stellantis might be a riskier investment in the short term, given its operational challenges and the potential for tariffs to hit its bottom line. However, investors with a long-term horizon may want to keep an eye on the company’s efforts to improve its operations and product offerings. If Stellantis can turn around its fortunes, it could be a strong performer down the road.
Toyota (TM): Strong Position, but Facing Import Issues
Stock Ticker: TM
Toyota is the world’s largest automaker and one of the few companies that has a relatively strong position in the face of these tariffs. However, like many other automakers, Toyota imports a significant portion of the vehicles it sells in the U.S. — about one million vehicles last year came from countries like Mexico, Canada, and Japan.
The company’s profitability, combined with its reputation for efficiency and innovation, makes it less vulnerable than many other automakers. Toyota is also investing heavily in the electric vehicle market, which should provide growth opportunities in the coming years.
Investment Strategy: Toyota remains a solid long-term investment due to its strong market position, profitability, and commitment to electrification. While the tariffs could pose some short-term challenges, Toyota’s diversified global operations and focus on innovation make it a reliable stock for investors looking for steady returns.
Volkswagen (VWAGY): High Import Exposure and Struggling in China
Stock Ticker: VWAGY
Volkswagen, Europe’s largest automaker, faces a particularly tough situation. The company has a limited manufacturing presence in the U.S. (a plant in Tennessee), and imports a significant portion of its cars from Mexico and Germany. Volkswagen has also been struggling financially due to declining sales in China, where local automakers are increasingly dominating the market with affordable EVs.
The tariffs will likely make it more difficult for Volkswagen to expand in the U.S., further hindering its efforts to recover from financial struggles.
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Investment Strategy: Volkswagen is likely to face headwinds in the near term due to high import exposure and financial challenges. However, its strong brand and focus on EVs could lead to growth in the long term. Investors should be cautious but monitor Volkswagen’s strategic response to these tariffs, as any positive developments in the EV sector could signal an opportunity for future growth.Reduce Your Expenses: 3 Areas Families Overspend
Hyundai and Kia (HYMTF, KIMTF): New U.S. Factories Could Provide Protection
Stock Tickers: HYMTF, KIMTF
Hyundai and Kia have made significant investments in the U.S., including a new electric vehicle factory in Georgia. This reduces their reliance on imports, which could help them avoid tariffs on some models. However, they still import a significant number of vehicles from South Korea, which could be subject to tariffs despite trade agreements.
Both companies have seen strong sales growth in the U.S. in recent years, and Hyundai’s new investment of $21 billion into U.S. manufacturing, including a new steel factory, indicates their commitment to expanding in the country.
Investment Strategy: For investors, Hyundai and Kia offer long-term growth potential, especially with their increasing focus on electric vehicles and the significant investments in U.S. manufacturing. While they still face some tariff-related risks, their strong market presence and focus on future technologies make them attractive for those looking for growth in the global automotive market.
Conclusion: Navigating the Long-Term Auto Tariff Impact
The tariffs on cars and auto parts announced by President Trump will have varying effects on automakers. While some companies like Tesla and Ford are relatively insulated from these tariffs, others like Stellantis and Volkswagen could face more significant challenges. For investors, it’s crucial to look at the long-term potential of these companies. Strong financial positions, commitment to electric vehicles, and global market presence will be key factors in determining which stocks are likely to thrive despite the challenges posed by tariffs.
For a successful long-term investment strategy, investors should consider balancing exposure to established companies with strong profitability (like Toyota and GM) with those that show potential for growth in emerging markets and EV technology (like Hyundai and Tesla). By closely monitoring each company’s response to these tariffs, investors can make informed decisions for the future.
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