President Trump may end up greatly reshaping the auto industry.
There has been a lot of discussion regarding how President Trump’s potential import tax could affect the auto industry. Most of it hasn’t featured hard figures, just frantic talk from automakers about how bad a border-adjusted tax would be for business. Now, thanks to research firm Baum & Associates, we have a better idea as to what this tax, if it went through, would cost automakers. Bloomberg has shared the results of the firm’s “thought exercise” which predicts that Jaguar Land Rover (JLR) will be the hardest automaker hit.
JLR would have to raise the cost of each model by $17,000 to deal with the tax (an estimate that also accounts for taxes of foreign-made auto parts), although the report notes that automakers will likely eat a significant portion of the added costs rather than pass them all onto consumers. The English automaker imports all its cars, hence why it would be hammered so hard. Companies with strong domestic manufacturing operations, like Ford and Tesla, have a rosier outlook. The Blue Oval would potentially only have to raise prices by $282, with Tesla being able to keep its pricing status quo as all of its manufacturing is done in California. The better news for the EV company is that, if the plan goes through, exports may become tax-exempt.
Other companies that would be greatly affected by an import tax include Volvo, Mitsubishi, Mazda and Volkswagen, all of which would have to raise prices by $5,000 or more. Larger companies like Volkswagen would be able to survive and adapt, but smaller companies like Mitsubishi and Mazda could either be forced out of the market entirely (the former) or have to quickly change how they build cars and where they source parts from (the latter).