Automotive Sector Plummets as Tariffs Hit, Stellantis Drops 5%
1min read On Friday, the automotive sector experienced a downturn, with stellantis (STLA.US) leading the decline by 5%. This drop was part of a broader market reaction to the announcement of new tariffs on imported vehicles into the United States. The tariffs, which were implemented by the Trump administration, imposed a 25% tax on all imported cars, leading to increased costs and potential disruptions in the industry's supply chain. The impact was felt across the sector, with other major automakers also experiencing significant declines. tesla (TSLA.US) saw a drop of over 7.4%, while general motors (GM.US) and Ford (F.US) fell by 3.5% and 0.16% respectively.
Stellantis, in response to the tariffs, announced a dual strategy to mitigate the impact. The company declared an emergency layoff of 900 workers across five of its U.S. factories. CEO Carlos Tavares described this move as a response to the "terrifying consequences" of the tariff policy. Additionally, Stellantis introduced promotional activities, offering public discounts on employee prices, with discounts reaching up to 12% of the suggested retail price. This promotion includes core models such as the Jeep Grand Cherokee. Despite having a 78% local production rate in North America, which is higher than the industry average, Stellantis faces a 25% additional tariff on imported components such as transmissions. This tariff increase will add $2,300 to the production cost of each Ram 1500 pickup, directly consuming 32% of the first-quarter profit margin.
Following Stellantis' announcement of layoffs, the United Auto Workers union initiated emergency provisions, demanding a renegotiation of the four-year wage agreement signed in 2023. The union's move underscores the broader impact of the tariffs on the automotive industry, affecting not only production costs but also labor agreements and market strategies. The long-term effects of these tariffs remain uncertain, but the immediate market reaction highlights the sensitivity of the sector to changes in trade policy.
Ask Aime: What impact will the new import tariffs have on the automotive industry?
