Summary
- Honda Prologue and the Chevy Equinox EV were top-selling non-Tesla EVs in Q3
- Mexico assembled vehicles at risk of a 25% tariff under President-elect Trump
- 20-25% of Tesla parts are sourced from Mexico; potential impact of tariffs on EV market
- Ford, Chevrolet, Honda, BMW, and Audi rely on Mexico manufacturing; tariffs could stall growth
- Japanese and Korean EVs may be less affected by tariffs due to lower Chinese component usage; South Korean and Japanese automakers could benefit from tariffs
Article
The Impact of Trump’s Proposed Tariffs on the U.S. EV Market
The Honda Prologue and the Chevy Equinox EV were some of the best-selling non-Tesla EVs in the third quarter, but both face potential consequences if President-elect Donald Trump follows through with his plan to impose a 25% tariff on all goods imported from Mexico and Canada. These tariffs could disrupt global trade and significantly impact the U.S. EV market, which has seen consecutive quarters of record sales growth driven by new, affordable models. Several major automakers, including General Motors, Tesla, Ford, Honda, BMW, and Audi, rely on manufacturing facilities in Mexico, making them vulnerable to the proposed policy shift.
Analyzing the Model Year 2024 EVs and PHEVs
An analysis of Model Year 2024 EVs and PHEVs shows the percentage of vehicle content sourced from various countries, highlighting the potential impact of tariffs on these vehicles. Popular EVs like the Ford Mustang Mach-E, Chevrolet Equinox EV, Blazer EV, and Honda Prologue undergo final assembly in Mexico, while Tesla manufactures its EVs in the U.S. However, some components in Tesla vehicles are sourced from Mexico. This breakdown provides insight into how the proposed tariffs could affect different EV models based on their country of origin and final assembly location.
Tesla’s Vulnerability to Tariffs
Although Tesla manufactures its EVs in the U.S., the analysis reveals that approximately 20-25% of the parts content in all Tesla vehicles is sourced from Mexico. This indicates that Tesla is not immune to the potential impact of tariffs, despite being a U.S.-based automaker. It remains to be seen whether Trump will make an exception for Tesla, especially considering CEO Elon Musk’s role in the new Department of Government Efficiency and his campaign contributions to Trump.
Global Trade Uncertainty and Industry Response
The fear of tariffs making cars more expensive has created uncertainty in the global automotive industry, leading to a decline in share prices for several U.S. and European automakers. With over 2.55 million cars manufactured in Mexico being imported to the U.S. in 2023, the potential impact of tariffs on the industry is significant. Japanese and Korean EVs may be relatively more insulated from the tariffs, but they still source some components from China. In contrast, American EVs, trucks, and SUVs are likely to face the brunt of the new duties if Trump’s America-first tariffs are implemented.
Opportunities for South Korean and Japanese Automakers
Despite the challenges posed by Trump’s proposed tariffs, there are opportunities for South Korean and Japanese automakers to benefit from increased protectionism. The Hyundai Ioniq 5 is now manufactured in Georgia, while other models like the Genesis G80 Electrified, GV60, Toyota bZ4x, and Lexus RZ primarily use components from Japan or Korea. If the tariffs are implemented, these automakers could see an increase in market share as American manufacturers face higher costs and market uncertainty.
Conclusion
The potential impact of President-elect Donald Trump’s proposed tariffs on the U.S. EV market highlights the interconnectedness of global trade and the automotive industry. While some automakers may be more insulated from the tariffs than others, the overall uncertainty and potential cost increases could disrupt the growth of the EV market in the U.S. As the industry navigates these challenges, it will be important for automakers to adapt to changing trade policies and consumer demand to remain competitive in a rapidly evolving market landscape.
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