Automobile makers, auto-parts suppliers, and other companies in the automobile industry have mostly gone in reverse since tariff tensions ratcheted up. Here’s how tariffs have whipsawed auto stocks and how investors may be able to find smoother roads.
Auto tariffs slam the brakes on car industry
The 25% auto tariff instituted by the Trump administration that applies to cars and car parts (with a credit for parts produced in the US) have helped drive the S&P 1500 Automobiles and Components Industry Group Index down nearly 40% as of early April.
About half of new cars sold in the US during 2024 were imported, according to Kelley Blue Book, with the average price near $48,000. That’s up dramatically from pre-COVID years, when the average price was about $39,000. Auto-industry experts broadly expect that prices are likely to climb further as tariffs and other trade barriers unfold.
While the long-term goal of auto tariffs is to bring more production of a key industry back to the United States, in the short term it has resulted in a significant amount of uncertainty for automakers.
Several have announced “import fees” for cars coming into the US, along with higher list prices, production pauses, and plans to lay off staff. It’s likely that, in addition to higher prices, dealers may also offer fewer incentives (which are subsidized by auto manufacturers) that would effectively raise prices as well. Incentives that may run into a stop sign include things like cash-back offers and 0% APRs on qualifying leases.
Auto-stock investing in the age of tariffs
Amy Ge, manager of the Fidelity® Select Automotive Portfolio (
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“My primary positioning on tariffs—which has become an important factor among a range of others for auto-industry investors—is an overweight in dealers,” Ge states. “Used car supply is still recovering from low levels caused by fallout from COVID, and dealers could still be under-earning on volumes. While tariffs would likely slow down the pace of the volume recovery (because higher new car prices would drive consumers to keep their current cars for longer instead of trading them in to dealers for a new car), they would also keep used car prices higher for longer, benefitting dealers' margins.”
“In either case—tariffs or no tariffs—dealer financials should be better insulated versus auto original equipment manufacturers (OEMs).”
Ge also points to major auto-parts retailers, which have historically exhibited defensive characteristics during times of economic stress, as well as luxury car brands. Of course, even those stocks may not be able to speed by a broader economic downturn.
As for the bigger names in the industry, auto manufacturers need more clarity on tariffs and electric vehicle (EV) subsidies to halt their bearish momentum. “Suppliers could be facing more downside risks in 2025,” according to Ge. “Low expectations could be lowered even further in the coming weeks and months. With that said, many auto manufacturers are working to stabilize production schedules to align with a new economic environment.”
Ge adds that the leading US EV makers may have a head start in the new tariff regime as they feature final assembly in the US, and major car manufacturers that currently have more US-centric production processes may benefit. Nevertheless, all these manufacturers have exposure to imported parts to varying degrees.
Tariffs to drive volatility
Of course, it’s possible that tariffs and other trade-barrier policies may not go into effect, could be negotiated down, and exemptions could be granted. With that said, much like other sectors of the market, mounting trade tensions could continue to drive volatility in the auto industry for the foreseeable future.