The implementation of 25% auto tariffs is expected to drive significant price increases leading to demand destruction of up to 3.2 million vehicles annually and a potential 15% to 20% reduction in vehicle sales, BofA Securities said in a note Wednesday.
Some vehicle production can be relocated to the US to offset tariffs, but the capacity is limited to about 1 million units without major investments, according to the note.
General Motors (GM) and Stellantis (STLA) are best positioned to benefit from this shift but labor shortages may pose challenges, BofA said.
The firm also said the full impact of auto parts tariffs remains unclear, with potential outcomes ranging from targeted powertrain and electronics tariffs to broad tariffs on all imported auto parts.
The estimated cost impact of auto parts tariffs could reach $26 billion, translating to an average additional cost of $3,285 per vehicle, BofA added. Automakers have little flexibility to relocate parts production domestically due to labor constraints.
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