Auto Makers, Parts Companies Eye Mexico Tariff Talks After Trump Threat

The auto industry is beginning the week with worries about President Donald Trump’s threat to put tariffs as high as 25 percent on U.S. imports from Mexico as officials from the two countries begin talking details.

Mexican Economy Minister Graciela Marquez planned to meet Monday with U.S. Commerce Secretary Wilbur Ross to begin talks on Trump’s threat to levy the tariffs until illegal immigration from Mexico stops.

Share prices for car companies and auto suppliers dropped late last week after Trump’s Friday tweet; many U.S.-sold cars are made in Mexico and nearly every car maker is reliant on Mexican made parts.

“Autos is the most at-risk sector from Mexico tariffs,” UBS Securities analyst Colin Langan said in a Friday note. 

Mexico is the biggest supplier of finished cars to the United States.

The US imported $93 billion in vehicles from Mexico in 2018 -- this 5% tariff is going to quickly hit automakers, dealers and consumers https://t.co/xEdT1c43Kp

— David Shepardson (@davidshepardson) May 31, 2019

Trump promised a 5-percent tariff on U.S imports from Mexico starting June 10 that could potentially rise to 25 percent if migration continues.

Deutsche Bank analyst Emmanuel Rosner said in a note that a 25-percent tariff would add about $1,300 on average to the cost of a car in the United States, which could force production to shrink by nearly 20 percent.

Most At Risk

Here’s a look at auto companies with the most cars made in Mexico and exported to the U.S., based on data from Mexico’s National Institute of Statistics and Geography. 

General Motors Company GM

GM is Mexico's largest automaker, and the biggest exporter of cars from Mexico to the United States, shipping 666,000-plus units north last year. GM is also at risk because its profitable full-size pickup production is all in Mexico. GM has 14 manufacturing plants there, including those making the Chevy Silverado and the GMC Sierra. About 13 percent of its American-sold vehicles are made in Mexico.

Fiat Chrysler Automobiles NV FCAU

Fiat Chrysler makes its Dodge Ram full-size pickups, the industry’s most profitable, in Mexico. FCA has expanded production in Mexico over the last decade, increasing total annual exports to the U.S. by 200 percent to more than 500,000 cars and trucks last year.

Nissan Motor Co Ltd NSANY

Nissan shipped more than 373,500 units to the U.S. last year from Mexican production plants. It makes the Nissan Sentra and Versa there.

Ford Motor Co. F 

Ford exported more than 250,000 units to the U.S. from Mexico, though it’s the only U.S. automaker to reduce its Mexican production footprint in recent years. All of Ford’s full-size pickups are made in the U.S. 

Volkswagen AG/ADR VWAGY

Volkswagen has 3 percent of its global production in Mexico and last year shipped more than 200,000 vehicles to the U.S. 

Kia Motors Corp.

Kia exported about 142,000 vehicles from Mexico to the U.S. last year. 

Toyota Motor Corp TM

Toyota, which makes many of its Tacoma pickups in Mexico for export to the U.S., shipped more than 130,000 units to the U.S. in 2018.

Most of the automakers saw their share prices drop last week, but were seeing a slight recovery Monday. 

Parts

Tariffs on Mexican goods would cost car makers even when they assemble autos in the U.S.: between 25 percent and 40 percent of parts, or about $60 billion, come from Mexico. Parts imports from Mexico last year were worth about three times the value of parts from the next biggest supplier, China.

The industry accounts for about 15 percent of total exports from Mexico.

Some auto suppliers with Mexico risk saw their stock prices drop Friday, but were recovering Monday. 

Among them:

Aptiv PLC APTV is an Irish company, but primarily serves its North American market from Mexico. Its shares were rebounding Monday and trading 3.54-percent higher at the time of publication after dropping about 6 percent on Friday. 

Delphi Technologies PLC DLPH shares were also rebounding, trading up by 3.62 percent. 

Other auto part makers that fell last week on the news include Lear Corporation LEA and Visteon Corp. VC.

Related Links:

10 Stocks Taking A Big Hit On Mexico Tariff Threat

Trump Says US Will Impose 5% Tariff On Mexico Imports Starting June 10

A Ram 2500 on the assembly line at the FCA Saltillo Truck Assembly Plant in Mexico. Photo courtesy of Fiat Chrysler.