On Thursday, TD Cowen provided insights into the potential impact of President Trump’s recent announcement of 25% auto tariffs on U.S. auto stocks. The firm anticipates that auto stocks will likely face significant pressure due to the tariffs, with Tesla (NASDAQ:TSLA) potentially outperforming its peers because of its lower tariff exposure and opportunities to gain market share in the midsize crossover segment. This news comes as Stellantis (NYSE:STLA) trades near its 52-week low of $11.40, with the stock down 8.35% year-to-date. According to InvestingPro, Stellantis currently offers a significant dividend yield of 10.31%.
According to TD Cowen, the Detroit 3 automakers—Ford, General Motors (NYSE:GM), and Stellantis—could experience a substantial initial impact. Assuming the tariffs on imported vehicles from Mexico and Canada remain, along with the effects of tariffs from other countries, the firm estimates that 2025 pro forma earnings could decrease by approximately 30-60%. This estimate does not account for potential parts tariffs, but it does exclude U.S. content exclusions. Ford is noted to be the least exposed to these tariffs, while Stellantis faces the most significant exposure. With $162.5 billion in revenue and a moderate debt-to-equity ratio of 0.46, Stellantis appears undervalued according to InvestingPro’s Fair Value analysis, trading at just 0.39 times book value.
In the event that the tariffs are perceived as permanent, automakers may consider relocating final assembly to the United States. TD Cowen suggests that the Detroit 3 have enough capacity to potentially absorb such shifts. If this relocation occurs, the ongoing impact on 2025 pro forma EBIT is estimated to be between 2-15%, reflecting higher U.S. labor costs and a 30% mitigation of other tariffs.
Tesla is highlighted as a relative "winner" in this scenario, given its 100% U.S. production footprint and substantial domestic sourcing. The Model Y, competing in the midsize crossover market, could benefit as approximately half of the vehicles in this segment may be subject to tariffs.
Auto suppliers are also expected to feel the pressure from potential parts tariffs. However, they are considered to be less directly exposed than automakers due to their ability to pass through potential costs. Suppliers could face risks from possible auto production declines, but some U.S. suppliers might see an improved North American customer mix under certain scenarios.
TD Cowen concludes by advising market watchers to pay attention to automaker responses and any forthcoming negotiations. The firm also notes that strategic events like tariffs, along with recent shortages, strikes, and shutdowns, support the advancement of autonomous vehicle business models to generate recurring revenue from an installed base. For investors seeking deeper insights, InvestingPro offers comprehensive analysis with 13 additional ProTips and a detailed Pro Research Report, helping investors navigate these complex market dynamics with confidence.
In other recent news, Stellantis has reported that tariffs imposed on imports from Canada and Mexico are negatively impacting its Jeep and Ram brands. The company communicated these concerns to its U.S. dealers, highlighting the competitive disadvantage against European and Asian brands. Meanwhile, Stellantis is offering voluntary buyouts to employees at select U.S. factories in an effort to cut costs and improve operational efficiency. This move is part of the company’s broader strategy to navigate a challenging market environment. Additionally, Piper Sandler has downgraded Stellantis’ stock rating from Overweight to Neutral, citing financial outlook reassessments and operational challenges. The analyst firm also reduced the price target significantly, reflecting skepticism about the company’s future earnings. On a positive note, Chrysler Pacifica and Jeep Wagoneer L, both part of the Stellantis brand portfolio, have won U.S. News & World Report awards for family cars, praised for their safety and reliability features. These developments paint a complex picture for Stellantis as it addresses both challenges and accolades in the automotive industry.
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