What are tariffs and how do they affect car companies?

Tariffs are taxes imposed on imported goods. When the U.S. places tariffs on foreign cars, it makes them more expensive for American consumers. This creates a cost disadvantage for foreign automakers like Volkswagen, while giving domestic car companies a competitive edge since their vehicles aren't subject to these additional costs.

Why did Volkswagen's profits drop so much?

Volkswagen faced a €1.3 billion hit to its income due to U.S. import tariffs, causing a 33% drop in operating profit. The tariffs made their cars more expensive in the U.S. market, leading to a 16% decline in vehicle sales as consumers chose more affordable alternatives.

How do domestic auto companies benefit from these tariffs?

American automakers and their suppliers benefit because they produce vehicles and parts within the U.S., avoiding tariff costs entirely. This gives them a pricing advantage and the potential to capture market share from foreign competitors who must either raise prices or absorb the tariff costs themselves.

What does 'cyclical automotive sector' mean?

The automotive sector is considered cyclical because car sales tend to rise and fall with economic cycles. During good economic times, people buy more cars, and during downturns, they postpone purchases. This makes auto stocks sensitive to broader economic conditions and consumer confidence.

Are these tariff advantages permanent?

Tariff policies can change based on political decisions and trade negotiations. This makes the domestic auto advantage a tactical investment opportunity that depends on current trade policies. Investors should monitor political developments that could affect these trade dynamics.

14 handpicked stocks

Domestic Auto Advantage: Navigating U.S. Tariffs

Volkswagen's recent profit warning, caused by U.S. import tariffs, highlights a significant challenge for foreign automakers. This creates a competitive advantage for American-based car manufacturers and their parts suppliers who are shielded from these costs.

Han Tan | Market Analyst

Published on July 25

Top Picks from This Group

Here are a few of the assets in this group. Create an account to unlock the full list.

General Motors Co.

Current price

$59.36

Major American automaker positioned to benefit from reduced foreign competition due to tariff pressures.

Ford Motor Co.

Current price

$12.22

Iconic U.S. car manufacturer with domestic production capabilities shielded from import tariff costs.

American Axle & Manufacturing Holdings I

AXL

Current price

$6.08

Automotive parts supplier serving the domestic market without exposure to foreign import duties.

Motorcar Parts of America Inc

MPAA

Current price

$8.86

Lear Corp.

LEA

Current price

$102.25

Visteon Corporation

Current price

$121.25

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12 Month Growth Potential

Use the growth calculator to see how much investing in these assets could return over one year, based on aggregated analyst sentiment provided by Refinitive Ltd.

If you invested across these assets:

≈

In 12 months it might be worth:

$1,000.00

+13.50%

≈

About This Group of Stocks

Our Expert Thinking

U.S. import tariffs are creating a significant cost disadvantage for foreign automakers like Volkswagen, which recently warned of a €1.3 billion hit to income. This trade dynamic creates a competitive moat for American-based car manufacturers and their domestic suppliers who are shielded from these additional costs.

What You Need to Know

This group focuses on the cyclical automotive sector, specifically companies that operate within the U.S. market. These firms produce vehicles and components domestically, avoiding the tariff-related expenses that burden their international competitors. The theme represents a tactical play on current trade policies.

Why These Stocks

These companies were handpicked by professional analysts based on their potential to benefit from the cost disadvantages faced by foreign competitors. They're positioned to potentially capture market share and improve pricing power as tariffs make imported vehicles less competitive in the U.S. market.

Group Performance Snapshot

13.5%

Average 12 Month Profit

On average, analysts expect assets in this group to grow 13.5% over the next year.

9 of 14

Stocks Rated Buy by Analysts

9 of 14 assets in this group are rated Buy by professional analysts.

Source: Analyst sentiment is provided by Refinitiv Ltd, a global leader in financial market data with over 40k business clients. Refinitiv Ltd is an independent third party to Nemo. This is not advice.

Why You'll Want to Watch These Stocks

🏭

Made in America Advantage

These companies produce domestically, avoiding the tariff costs that are squeezing foreign competitors like Volkswagen. This cost advantage could translate into better margins and market share gains.

📈

Trade War Winners

As U.S. import tariffs create headwinds for international automakers, domestic players are positioned to benefit from reduced competition and potential pricing power in their home market.

🎯

Tactical Opportunity

This group represents a focused play on current trade dynamics, with companies selected specifically for their potential to capitalize on the challenges facing foreign automotive competitors.

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