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Trump's auto tariffs will hit many, but Elon Musk's Tesla less so

Published: 28 Mar. 2025, 16:44

Tesla CEO Elon Musk greets U.S. President Donald Trump as they attend the NCAA men's wrestling championships in Philadelphia, Pennsylvania, March 22. [REUTERS]

As the global auto world reeled from the potential fallout of U.S. President Donald Trump's new auto tariffs, one name stood out as less affected than others — EV maker Tesla.

The Texas-based company was the rare automaker to trade in the green in U.S. action on Thursday, as analysts said the EV maker's supply chain and financial performance may not be as affected by the wide-ranging levies that will impact global shipments of both cars and car parts to the United States. This is mainly due to the company's largely domestic production and supply chain.

Still, that relief in the United States, where Tesla CEO Elon Musk has become one of Trump's primary advisers, may not improve the brand's reputation worldwide.

The billionaire CEO, who heads the so-called Department of Government Efficiency, has been tasked with swiftly cutting federal spending. Tesla shares have plunged more than 40 percent since peaking in mid-December as a protest movement against the EV company has erupted both at home and around the world as DOGE has drawn heavy criticism for going after federal workers.

Tesla's models are relatively old and competition has been increasing. The stock closed 0.4 percent higher on Thursday, as shares of General Motors lost 7.4 percent, Ford Motor closed down nearly 4 percent and Stellantis shares lost 1.3 percent in U.S. trading.

Automakers' shares generally fell on expectations that the 25 percent tariffs will disrupt the global automotive industry, raise the cost of vehicles in the United States and pinch earnings.

While Tesla does import some parts from around the world, it is less dependent on foreign components than other automakers selling in the United States. All of Tesla's U.S.-sold vehicles are made in the United States, whereas Toyota imports 55 percent of its vehicles sold in the United States, and GM imports 48 percent of its inventory for U.S. sales, according to research from Bernstein. Many of the shipments are from Canada and Mexico.

A Bernstein analysis published on Thursday estimated that 61 percent of Tesla's U.S.-sold vehicle content comes from the United States, with 22 percent coming from Mexico, 7 percent from Canada and 3 percent from China. It described Tesla as the industry outlier on tariff impacts.

"With near-total U.S. sourcing, the company not only avoids pain but stands to gain margin as competitors raise prices," Bernstein analysts wrote.

Trump said the duties announced on Wednesday could be net neutral or even good for Tesla, adding that Musk did not advise him regarding auto tariffs.

Several administration officials have defended Tesla in public comments in recent days, ranging from urging people to buy its stock to opening investigations into vandalism at Tesla dealerships. Still, Musk late on Wednesday said, "To be clear, this will affect the price of parts in Tesla cars that come from other countries. The cost impact is not trivial."

Tesla imports lithium-ion batteries from China's CATL and other automotive parts from countries such as Korea, Japan and Mexico, according to import data filed through the end of February provided to Reuters by ImportYeti.

Car prices could rise by $5,000 to $15,000 if a 25 percent tariff on imported cars is maintained, according to Goldman Sachs.

"Tesla is a relative beneficiary given 100 percent U.S. production footprint, substantial U.S. sourcing and with Model Y competing in a midsize crossover segment where close to [around] 50 percent of vehicles could be subject to tariffs," TD Cowen analysts said in a note. Still, the automaker faces mounting challenges in Europe and Canada, where political sentiment and reduced EV incentives are eroding its competitive position. In Britain and the European Union, Tesla is grappling with policy headwinds and shrinking subsidies that threaten to dampen demand and slow its growth trajectory. Canada has frozen a rebate program for Teslas.

Wall Street on average expects Tesla to report a 3 percent rise in first-quarter deliveries next week, based on 20 analysts polled by Visible Alpha.

"Musk's involvement with Trump might be a factor weighing on sales outlook outside of the United States," said Sandeep Rao, senior researcher at Leverage Shares.

Reuters