Why Tesla may be spared from Trump’s auto tariffs

As the global auto world reeled from the potential fallout of Donald Trump‘s new auto tariffs, one name stood out as less affected than others—electric-vehicle maker Tesla.

The Texas-based company’s shares were the rare automotive stock to trade in the green in U.S. action, as analysts said Tesla’s supply chain and financial performance may not be affected by the wide-ranging levies that will affect global shipments of both cars and car parts to the United States, mainly due to the company’s largely domestic production.

Still, that relief in the United States, where Elon Musk has become one of President Trump’s primary advisers, tasked with swiftly cutting federal spending, may not improve the brand’s reputation worldwide.

Tesla shares have plunged more than 40% since peaking in mid-December as a protest movement against the EV company has erupted in the U.S. and around the world as the Musk-led Department of Government Efficiency has drawn heavy criticism for going after federal workers. The stock was up about 2% on Thursday.

The 25% tariffs are expected to disrupt the global automotive industry, raise the cost of vehicles in the United States, and pinch automakers’ earnings. Shares of Ford, General Motors and Chrysler-parent Stellantis were down between 2.1% and 7%.

While Tesla does import some parts from around the world, the company largely produces its vehicles in the United States. Analysts expect Tesla to report deliveries of about 398,000 vehicles when it reports figures for the first quarter next week, according to 20 analysts polled by Visible Alpha.

Trump said the duties announced on Wednesday could be net neutral or even good for Tesla, adding that his close ally Musk did not advise him regarding auto tariffs.

Several administration officials have defended Tesla in public comments in recent days, ranging from urging people to buy its stock to opening investigations into vandalism at Tesla dealerships.

Still, Musk late on Wednesday said, “To be clear, this will affect the price of parts in Tesla cars that come from other countries. The cost impact is not trivial.”

Tesla imports lithium-ion batteries from China’s Contemporary Amperex Technology Ltd and other automotive parts from countries such as South Korea, Japan and Mexico, according to import filing data through the end of February provided to Reuters by ImportYeti.

Car prices could rise by $5,000 to $15,000 if a 25% tariff on imported cars is maintained, according to Goldman Sachs.

Automakers are likely to pass on the impact of tariffs to customers by raising prices, and that could close the price gap between Tesla’s electric vehicles and competing gas-powered cars, analysts said.

“Tesla is a relative beneficiary given 100% U.S. production footprint, substantial U.S. sourcing and with Model Y competing in a midsize crossover segment where close to ~50% of vehicles could be subject to tariffs,” TD Cowen analysts said in a note.

While Trump’s tariffs may benefit Tesla in the United States, the automaker faces mounting challenges in Europe and Canada, where political sentiment and reduced electric vehicle incentives are eroding its competitive position.

In Britain and the European Union, Tesla is grappling with policy headwinds and shrinking subsidies that threaten to dampen demand and slow its growth trajectory. Canada has frozen a rebate program for Teslas.

“Musk’s involvement with Trump might be a factor weighing on sales outlook outside of the United States,” Sandeep Rao, senior researcher at Leverage Shares, said.

—Akash Sriram, Arsheeya Bajwa and Richa Naidu, Reuters

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