Stellantis, the new automotive colossus formed from the merger of Fiat Chrysler and PSA Group, has had a rough ride. The recent tariffs levied by the U.S. government have put a crippling impact on its business and sales. The sentiment was not helped by the company’s recently announced 10 percent decline in U.S. sales in the second quarter. They cited the direct impact of tariffs as driving this decline, as tariffs forced production halts and cut imports of some models.
Since April 3, the U.S. has added a 25% tariff on imported cars. Moreover, since May 3, a nearly identical tariff has been slapped on most auto parts imported from Canada. Combined, these tariffs have greatly undermined the auto industry. The sector is just beginning to recover from the damage inflicted by those earlier tariffs – instituted by President Donald Trump’s administration.
Stellantis even stated it would incur massive costs from these tariffs. By the end of the year, the company expects that range of expenses to be $4 billion to $5 billion. During those five months, the company had a very challenging first half of 2023. It posted a record loss of some €300 million, roughly $350 million, as a result of these tariffs. The effect has been devastating. This contributed to a 21% decline in net income for the second quarter and an increased net loss for the first half of the year, in part due to the company continuing its reorganization.
This increase has not just imposed costs on Stellantis’s bottom line. The tariffs have directly shaped average market-wide prices. The company forecasts that industrywide prices will rise only between 0.5% and 1% for the year, despite significant cost pressures from tariffs. That paltry uptick in prices underscores how cutthroat the automotive market truly is. Manufacturers are desperate to avoid passing costs on to consumers.
Every car made in American factories has at least a smattering of imported parts. In reality, well over 50% of the parts are usually imported. Certain parts that are imported from Canada remain tariff-free. Stellantis has a tough road ahead, specifically due to its intense dependency on foreign-made components given the state of the global economy.
The impact of these tariffs goes far beyond Stellantis, upending the entire automotive industry in the process. That’s far from every Mexican and Canadian car imported into the U.S. making their way to American car dealerships. This adds a degree of uncertainty to an already volatile market dynamic.
