Rohit Baniwal, writer
Brief news
- Ferrari is uniquely positioned in the automotive industry, likely unaffected by U.S. tariffs due to its high-end market and production solely in Italy, allowing it to pass on costs to consumers.
- President-elect Trump’s proposed tariffs on imports from Canada, Mexico, and China have raised concerns for the broader auto industry, potentially disrupting supply chains and increasing costs.
- Unlike Ferrari, Porsche may face greater challenges with tariffs, as it relies on German production and would struggle to pass on significant cost increases to consumers.
Detailed news
Ferrari is perceived as a unique entity within the European automotive industry, despite the fact that numerous automobile giants are experiencing pressure from the possibility of U.S. tariffs.
In one of his first acts in office, President-elect Donald Trump on Monday pledged to impose substantial tariffs on China, Canada, and Mexico. This move has the potential to disrupt the auto industry’s supply chains and raise investor apprehensions about increased costs.
Trump’s proposed measures include a 25% tariff on all commodities from Canada and Mexico and an additional 10% tariff on all Chinese products entering the United States.
The news caused a decline in auto shares, as it could have substantial repercussions for U.S. and European manufacturers. Many of these companies have constructed facilities and depend on auto parts suppliers located in Mexico.
The absence of any reference to Europe in Trump’s initial tariff announcement will be regarded as a positive development by European Union policymakers. However, the 27-nation bloc is likely to be concerned that Trump will eventually focus on the auto sector in the region.
Ferrari, on the other hand, is anticipated to be spared from the majority of the consequences.
“For Ferrari, it is the sole exception; regardless of the tariff, they will not commence production in the United States.” Rella Suskin, an equity analyst at Morningstar, informed CNBC via video teleconference that “everything transpires in Maranello, Italy.”
“The issue with Ferrari is that they can likely pass on a 10%, 20%, or 30% [tariff] to consumers in terms of price, given the high cost of their cars and the customer base they are targeting.”
In an effort to increase U.S. revenues, Trump had previously stated that he would impose a blanket 10% or 20% tariff on all products entering the country. This prompted apprehension among a variety of critical trade-dependent sectors, including the automotive industry.
Even a U.S. tariff of up to 30% on all products imported from Europe may not deter potential Ferrari buyers, according to Morningstar’s Suskin. “It is absurd, but that is the nature of the situation,” she continued.
CNBC was unable to obtain a response from a Ferrari spokesperson at the time.
Less price-sensitive than the majority
Ferrari appears to be in a position to pass on any price increase if Trump fulfills his promise to institute higher tariffs, as echoed by Tom Narayan, global autos analyst at RBC Capital Markets.
Thomas Besson, the director of automobile sector research at Kepler Cheuvreux, asserts that the Italian carmaker is distinguished from its European counterparts in this regard by the majority of analysts and investors.
Besson informed CNBC via email, “Time will tell, but it is likely accurate.”
This year, Ferrari has been extremely successful, surpassing its competitors in Europe. The Milan-listed company’s shares have increased by more than 34% year-to-date, which is substantially higher than the shares of Renault in France and Mercedes-Benz Group in Germany.
Anthony Dick, an auto analyst at Oddo BHF, informed CNBC via email that “We do not anticipate Ferrari establishing production in the United States.”
“For brand, but also (and likely more importantly) industrial reasons, as that would necessitate the group to establish its supply base locally, which we do not believe is feasible,” he continued.
Dick stated, “It is uncertain at this time how tariffs would affect demand; however, it is reasonable to assume that Ferrari customers are less price sensitive than the majority.” He also mentioned that the group’s luxury car competitors would be subject to comparable tariff treatment.
“Porsche is a bit unique.”
Besson of Kepler Cheuvreux predicted that Porsche would encounter a “even greater obstacle” in the event of additional U.S. tariffs.
Porsche, which is controlled by Volkswagen, has historically constructed its luxury models in Germany, similar to Ferrari, which manufactures its vehicles exclusively in Italy.
Suskin of Morningstar stated, “Porsche is a bit unique.”
She continued, “They could impose a 10% tariff; however, larger tariffs, such as 30%, may be more challenging to pass on to a customer.”
“They could leverage the spare capacity of their parent company Volkswagen in the United States; however, investing in a Porsche-specific production line would require a significant amount of capital expenditure.”
Porsche’s shares have declined by approximately 26% year-to-date.
Source : CNBC news
