The U.S. automotive industry is bracing for the potential impact of new tariffs, with a recent Bernstein analysis revealing that Ford Motor Company (NYSE: F) and Rivian Automotive, Inc. (NASDAQ: RIVN) could face greater headwinds than previously anticipated. Meanwhile, Stellantis NV (NYSE: STLA) appears better positioned due to its higher domestic content, providing some insulation from the looming trade policy shift.
Ford’s Unexpected Tariff Vulnerability
Bernstein’s report highlighted that Ford’s U.S.-assembled vehicles contain only 30% domestic content, significantly lower than expected. This makes the company particularly vulnerable if tariffs target non-domestic parts.
- Impact on Gross Profits: Ford could experience a similar or even greater impact on gross profits compared to its peers, despite assembling vehicles domestically.
- Supply Chain Exposure: With substantial reliance on overseas parts, Ford’s margins could come under pressure if tariffs are applied to certain countries, particularly Mexico and South Korea.
Rivian’s Tariff Troubles
Rivian, a key player in the EV market, faces its own set of challenges. The company could see its gross margin shrink by 100 to 200 basis points due to tariffs on steel and aluminum imports.
- Parts Tariff Exposure: Rivian’s recent insourcing of motors—which replaced previously sourced parts from Bosch (NSE: BOSH)—could increase its vulnerability to Mexican and South Korean tariffs.
- Profitability Concerns: With the company still far from breakeven, these additional cost pressures could further strain Rivian’s margins.
Stellantis: The Strongest Detroit Contender
In contrast, Stellantis appears to be in a stronger position than its Detroit rivals.
- The company manufactures 60% of its U.S.-sold vehicles domestically, with a higher domestic RVC of 47%.
- This larger U.S.-based supply chain makes Stellantis less exposed to cross-border tariffs, providing a potential competitive advantage over Ford and GM.
GM’s Moderate Exposure
General Motors (NYSE: GM) also faces tariff risks, but they appear to be in line with earlier expectations.
- Domestic Production: GM manufactures 52% of its U.S. vehicles domestically, with 29% domestic content.
- Reliance on Mexico: However, 31% of the RVC for its U.S.-produced vehicles comes from Mexican parts, making the company moderately exposed.
Polestar’s Financial Struggles Intensify
Bernstein analysts also warned about Polestar (NASDAQ: PSNY), the EV subsidiary of Volvo (OTC: VLVLY), which could face mounting tariff-related pressures.
- Heavy Reliance on Mexico and China: Despite launching Polestar 3 production in South Carolina, the company still sources significant parts from Mexico and China.
- Financial Weakness: Polestar reported a 10% year-over-year revenue decline in Q3 2024 and a net loss of $323 million. Its gross profit margin remains deeply negative at -22.6%, and the company is burdened with $4 billion in debt.
Bernstein’s Revised Outlook
Despite the looming challenges, Bernstein analysts have raised their price target for Polestar to $0.40 from $0.33, maintaining a Market Perform rating. This comes after Polestar’s new management announced a strategy shift toward premium EVs and cash conservation.
Bottom Line
The U.S. tariff landscape is set to reshape the automotive industry, with Ford and Rivian facing disproportionate risks due to their foreign content reliance. In contrast, Stellantis appears more insulated, with GM moderately exposed. Meanwhile, Polestar’s financial woes and dependency on foreign suppliers leave it vulnerable, despite its attempts to pivot toward premium vehicles.
