- BMW, Mercedes-Benz, Porsche and Volkswagen shares dropped by up to 6.4% after Donald Trump was reelected for a second term.
- It was likely his plan to add new import tariffs on goods from abroad that sent the stock prices down.
- Trump has said he plans to impose tariffs as high as 75% if Mexico doesn't address his illegal immigration concerns.
Former President—and now president-elect—Donald Trump has not shied away from threatening to impose new tariffs on imports from the European Union, Mexico and other regions. There is a big difference between what he says he’s going to do and what actually gets implemented, but simply stating that he wanted to add new levies was enough to make the stock prices of the major German automakers take a dive.
BMW, Mercedes-Benz, Porsche and Volkswagen shares dropped by between 4.6% and 6.4% today after Trump was proclaimed the winner of the election and is returning into office for a second term that could drastically change the EV landscape in America.
This could be bad news for the German carmakers since the United States has traditionally been one of the most important markets—together, the Germans sold 12.9% of their entire 2023 production in the U.S., amounting to 3.1 million cars.
Their reliance on the U.S. as the main market hasn’t changed over the years, even with more focus than ever now going toward China, which dethroned the U.S. as the world’s largest car market in 2009. And China's auto industry is hitting Europe's carmakers on two fronts—lost market share in China, and brutal new competition at home.
Last week, Trump said “I'll tell you what, the European Union sounds so nice, so lovely, right? All the nice European little countries that get together." He added, “They don't take our cars. They don't take our farm products. They sell millions and millions of cars in the United States. No, no, no, they are going to have to pay a big price.”
He is reportedly planning to impose tariffs of up to 10% on all imports, and this will have a major impact on the E.U., which last year exported almost $540 billion in goods to the U.S. (a fifth of its total exports), of which over $220 billion were vehicles and machinery. Germany is by far the biggest exporter, sending $160 billion worth of goods stateside, according to data from the European Commission.
The E.U. is imposing its own import tariffs aimed specifically at vehicles coming in from China. However, if the U.S. adds new duties, there's a strong chance the E.U. will respond and enact its own or find some other ways of putting pressure.
Trump said he also wants to impose higher tariffs on goods (and cars) from Mexico if the southern neighbor doesn’t do something about illegal immigration. EuroNews quotes him as saying while referring to Mexican president Claudia Sheinbaum “I will notify her on day one, or even sooner, that if they do not put an end to this influx of criminals and drugs into our country, I will immediately impose a 25% tariff on everything they send to the United States.”
He went on to say that if this doesn’t work, he intends to raise the tariff to 75%. This would make the situation especially bad for the German automakers, most of which either already have them or planning to build factories in Mexico. BMW is basing its entire future on the Neue Klasse line of models that will be coming out of the group’s San Luis Potosi plant, which we recently toured, and if things get really bad, it may even have to reevaluate whether it’s economically viable to build these new EVs in Mexico.
There is also a fear that the Inflation Reduction Act will be repealed under Donald Trump, taking with it the federal tax credit for electric vehicles. Even though the conditions for federal tax credit eligibility were tightened, making fewer vehicles quality, it still cuts up to $7,500 off the price of many EVs, making them attractive and bringing them within reach of people who otherwise couldn’t have afforded one and simply bought a gas car.
Manufacturers are relying on the credit to help them sell EVs in the U.S., and without it they may not see the incentive to building cars in America, potentially moving production to regions with lower labor rates. This would be at odds with what the Trump administration says it strives for, which is to bring as much outsourced production back on home turf, and it could mean the federal tax credit will remain in place.
Chinese EV manufacturers also saw stock drops as a result of Trump's reelection—Nio fell 6% today. Meanwhile, Tesla stocks went up 13%, while Rivian and Lucid fell by 9% and 3.1%, respectively, according to the Associated Press.
Tesla is expected to gain a lot during Trump’s term after the support shown by CEO Elon Musk during the campaign, although CNN believes it may also pose risks for his and Tesla’s plans. It could too lose out on the EV tax credits spurring more electric adoption, although those had become much more limited for the electric automaker this year.
Instead, it may be far more possible that cutting off competitors before they can really get started making EV competitors will only help Tesla in the long run—perhaps why Musk himself advocated for getting rid of all subsidies "as they will only help Tesla."
But at least some analysts are looking on the bright side here. "The relationship that Elon Musk has established with the Trump administration could have notable implications for the EV market, particularly if the existing EV tax incentives are eliminated," said Jessica Caldwell, Edmunds’ head of insights. "From the beginning, Musk has made it clear that he wants to see the EV market succeed beyond Tesla, so it’s possible he may try to influence a new incentive structure that continues to support broader EV adoption in the U.S."
Either way, betting on Trump clearly worked out well for Tesla and Musk. Now the other automakers have to figure out a different ball game.
