The European Union and the US have reached a trade deal, setting the baseline tariff rate at 15% for imports from the EU, including autos.
Why it matters: A 15% US import tariff is far less burdensome for EU automakers than the 27.5% currently being applied.
- For EU automakers, US sales that are not sourced domestically are primarily sourced from the EU or Mexico and/or Canada. This deal benefits automakers that have a greater reliance on exports from the EU.
- We estimate that Porsche P911, Mercedes-Benz MBG, BMW BMW, and Volkswagen VOW, in that order, are the most significant beneficiaries of this trade deal, with a greater share of exports from the EU into the US versus Mexico and/or Canada. Stellantis STLAM exports a single-digit share of its volumes from the EU for sale in the US, and thus should not see meaningful upside. While Ferrari exports 100% of its vehicles sold in the US, from the EU, its financials were largely unaffected by tariffs, even at the maximum tariff burden.
The bottom line: We incorporated tariffs into our forecasts by taking a weighted average across four tariff scenarios, with the average less burdensome than the maximum tariff of 27.5%. These scenarios also included the indirect effects of lower US vehicle sales, which are still playing out. We maintain our fair value estimates for the time being.
- Volkswagen expects to strike a separate deal with the US, following the conclusion of the EU-US trade deal.
- BMW, Volkswagen, and Ferrari’s RACE share prices are trading at levels higher than just before news regarding US tariffs commenced earlier this year, indicating that the market has already priced in a lower tariff burden, particularly following the US-Japan trade deal on July 23. For Mercedes-Benz, Porsche, and Stellantis, their share performance lags company-specific strategic matters.
