Trump’s tariff threats have rattled Europe’s auto giants — but Ferrari appears remarkably unfazed
Workers on the production line at the new Ferrari NV E-building factory in Maranello, Italy, on Friday, June 21, 2024.
Francesca Volpi | Bloomberg | Getty Images
Ferrari is thought to be something of a special case among Europe’s automobile sector even as many car giants come under pressure from the threat of U.S. tariffs.
President-elect Donald Trump on Monday vowed to impose steep tariffs on China, Canada and Mexico in one of his first acts in office, threatening to shake up the auto industry’s supply chains and raising investor concerns about higher costs.
Trump’s proposed measures include an additional 10% tariff on all Chinese products coming into the U.S. and a 25% tariff on all goods coming from Canada and Mexico.
Auto shares fell on the news given that it could have significant consequences for U.S. and European manufacturers, many of which have built factories and rely on auto parts suppliers based in Mexico.
The fact that Europe was not mentioned in Trump’s first tariff announcement will be regarded as welcome news for European Union policymakers, although the 27-nation bloc is likely worried that it’s just a matter of time before Trump turns his attention to the region’s auto sector.
Ferrari, however, is expected to be shielded from most of the fallout.
“For Ferrari, it is the one exception where whatever the tariff is, they are not going to start producing in the U.S. Everything happens in Maranello, Italy,” Rella Suskin, equity analyst at Morningstar, told CNBC via video call.
“The thing with Ferrari is, if it is a 10%, 20% or 30% [tariff] then they can probably easily pass that on in price to consumers, just given the customer they are targeting and how expensive the cars are already.”
In an effort to raise U.S. revenues, Trump previously pledged to impose a blanket 10% or 20% tariff on all goods coming into the country, prompting concern among a wide range of key trade-dependent sectors such as autos.
For Morningstar’s Suskin, even a U.S. tariff as high as 30% on all goods coming in from Europe may not deter would-be customers from buying a Ferrari. “It’s ridiculous but that’s kind of the way it is,” she added.
A spokesperson for Ferrari was not immediately available to comment when contacted by CNBC.
‘Less price sensitive than most’
Tom Narayan, global autos analyst at RBC Capital Markets, echoed this view, saying Ferrari does appear to be in a position to pass on any increase in prices should Trump deliver on his pledge to introduce higher tariffs.
Most analysts and investors recognize the Italian carmaker as unique among its European peers in this respect, according to Thomas Besson, head of automobile sector research at Kepler Cheuvreux.
“Time will tell but it is probably right,” Besson told CNBC via email.
The original Ferrari Factory entrance in Maranello. The Emilia Romagna Grand Prix takes place this weekend at the Autodromo Internazionale Enzo e Dino Ferrari circuit in Italy.
David Davies – Pa Images | Pa Images | Getty Images
Ferrari has been on a tear this year, outperforming rival carmakers in Europe. Shares of the Milan-listed company have climbed over 34% year-to-date, significantly higher than the likes of France’s Renault or Germany’s Mercedes-Benz Group.
“We don’t expect Ferrari to set up production in the US,” Anthony Dick, an auto analyst at Oddo BHF, told CNBC via email.
“For brand, but also (and likely more importantly) industrial reasons as that would require the group to set up its supply base locally which does not seem feasible to us,” he added.
“It’s unclear at this stage how tariffs would impact demand, but one could reasonably assume that Ferrari customers are less price sensitive than most,” Dick said, noting that the group’s luxury car competitors would face similar tariff treatment.
‘Porsche is a little bit different’
The prospect of additional U.S. duties was likely to be a “much bigger hurdle” for Germany’s Porsche, Kepler Cheuvreux’s Besson said.
Like Ferrari, which exclusively produces its cars in Italy, Volkswagen-owned Porsche has traditionally built its luxury models in Germany.
“Porsche is a little bit different,” Morningstar’s Suskin said.
“They could pass on a 10% tariff but bigger [tariffs], such as 30% might be a bit more difficult to pass onto a customer,” she continued.
A worker checks the quality of the new all electric Porsche Macan at the Porsche assembly plant on May 6, 2024 in Leipzig, Germany.
Jens Schlueter | Getty Images News | Getty Images
“They could piggyback off their parent company Volkswagen that does have some spare capacity in the U.S. but there would be quite a bit of [capital expenditure] they’d need to invest to create a Porsche-specific production line.”
Shares of Porsche are down around 26% year-to-date.
A spokesperson for Porsche was not immediately available to comment when contacted by CNBC.
