As Washington mulls a tax on imports, an auto industry study suggests the policy would deliver the sharpest blow to Tata Motors Ltd’s Jaguar Land Rover, while giving a leg up to Tesla Inc and Ford Motor Co.
In what it called a “thought exercise,” researcher Baum & Associates LLC estimated most automakers would need to raise vehicle prices by thousands of US dollars — more than US$17,000 per vehicle in Jaguar Land Rover’s case, which imports all its vehicles to the US — to recoup higher costs incurred by a proposed border-adjusted tax.
Ford, with significant domestic manufacturing, would need to mull the smallest price increase among major automakers, at about US$282 per vehicle, followed by General Motors Co at US$995, according to the report.
The estimates aim to show the relative impact of the tax plan on each automaker, West Bloomfield, Michigan-based Baum & Associates founder Alan Baum said.
Automakers are unlikely to raise prices by more than a few thousand dollars per car and would also likely have to foot some of the higher tax burden, he said.
“The plan results in a net cost for automakers,” Baum said by telephone. “Each company will then make its own decisions on pricing in order to best compete and maximize its profits.”
Volvo Car Corp and Volkswagen AG vehicle prices would have to rise by about US$7,600 and US$6,800 on average respectively, according to estimates by Baum & Associates, which advises suppliers.
US President Donald Trump is said to be warming to the border-adjusted tax after initially viewing it as too complicated.
The proposal to begin levying companies’ imports and domestic sales, and make exports tax-exempt would completely overhaul the US tax code.
General Electric Co and Boeing Co are among US manufacturers getting behind the idea, while Toyota Motor Corp and Wal-Mart Stores Inc are among the corporate giants warning it would result in costlier products, ranging from food and clothing to gasoline and auto parts.
The Baum & Associates report accounts for imports of both finished vehicles and parts for domestic cars that are made overseas. The one automaker that could be able to keep prices steady would be Model S sedan maker Tesla.
The proposed border tax might induce automakers to boost US parts procurement and production from existing vehicle assembly plants, the report said.
Overseas automakers including Fuji Heavy Industries Ltd’s Subaru, Mitsubishi Motors Corp, Mazda Motor Corp, Hyundai Motor Co and Kia Motors Corp might also consider expanding existing US operations or building new capacity, it said.
“Pure importers,” such as Jaguar Land Rover, Volvo parent company Geely Automobile Holdings Ltd, Mazda and Mitsubishi, are most “in the crosshairs” of a border-tax regime due to their total reliance on imports for their US sales, the report said.
If the tax is put in place and the companies want to remain competitive, Jaguar Land Rover and Volvo “will need to ramp up US parts sourcing and/or build plants here [in the US],” the report said. “The border tax approach will otherwise consume all of their profits from selling vehicles here.”
Volvo is already moving in that direction, with plans to assemble S60 sedans at a new factory in South Carolina starting late next year.
General Motors, Fiat Chrysler Automobiles NV, Honda, Ford and Tesla each source more than 60 percent of their US vehicle sales in the US, according to the report, with Ford at 82 percent and Tesla exclusively assembling vehicles in California.
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