Trump’s Auto Tariffs Provide a Boost to Tesla

President Trump is imposing a 25% tariff on all cars imported into the U.S., including those from neighboring North American countries. Additionally, certain auto parts used in manufacturing will also face a 25% tariff. This move is expected to drive up the cost of both new and used cars but presents a significant advantage for Tesla, led by Elon Musk, Trump’s largest financial backer in the election.

The timing of these tariffs benefits Tesla, which has been navigating the fallout from Musk’s alignment with far-right ideology and his ties to the unpopular Department of Government Efficiency—controversies that have sparked global protests. In recent months, Tesla has relied on discounts and promotions to maintain sales. However, despite these efforts, the company sold fewer EVs in 2024 than in 2023 and has had a rocky start to 2025.

Tesla Gains Competitive Edge as New Tariffs Exempt Its U.S.-Built Vehicles

The new tariffs could change Tesla’s fortunes in the U.S. Since the company manufactures all its North American market vehicles in its Fremont, California, and Austin, Texas, factories, its cars will be exempt from the 25% import tax, giving it a competitive edge over foreign automakers.

Tesla imports about 20% to 30% of the components used in its vehicles, which will create some challenges. Musk acknowledged on X that Tesla is “NOT unscathed” by the tariffs and said they would have a “significant” impact. However, the company’s long-term strategy of developing local supply chains near its factories is now proving advantageous.

Most other automakers are in a tougher spot, especially when it comes to EVs. While about 80% of Ford’s U.S. sales come from domestically built vehicles, its all-electric Mustang Mach-E and the affordable Maverick hybrid pickup are manufactured in Mexico, making them subject to the new tariffs.

GM and Hyundai Hit Hard by Tariffs on Mexico- and South Korea-Built EVs

General Motors faces a similar issue, as it produces the Blazer and Equinox EVs in Mexico. Hyundai, which has been gaining traction in the U.S. EV market, builds nearly all its electric models in South Korea, putting them at a disadvantage.

Meanwhile, newer EV companies like Rivian and Lucid Motors, much like Tesla, won’t have to worry about the vehicle import tariffs since they manufacture their cars in Illinois and Arizona, respectively. However, they still rely on imported parts, which will be taxed. Unlike Tesla, these startups are in a weaker position to absorb the extra costs, as they continue to lose substantial money on each EV sold.

This creates a situation where competing EVs could face steeper price hikes than any Tesla might introduce. That price gap could work even more in Tesla’s favor when it launches its highly anticipated lower-cost EV later this year—a release the company has said is just months away.

Trump’s decision to impose these tariffs comes after weeks of uncertainty over whether he would follow through. He has declared them “permanent,” but, like many of his policies, that stance could still change.

Read the original article on: TechCrunch

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