FYI: Automakers face a daunting challenge as tariffs strain their financials, with Ford, GM, and Toyota feeling the pinch. Meanwhile, LG Energy Solution’s expansion in the EV battery sector and Polestar’s resurgence offer glimmers of hope for the industry.
Tariffs Take a Toll on Automakers
The dust surrounding tariffs is slowly settling, allowing automakers to grasp their financial impact. Ford foresees an additional $1.5 billion in costs this fiscal year, while General Motors anticipates a hit ranging from $4 to $5 billion. However, the most striking revelation comes from Toyota, potentially losing a staggering $1 million every hour due to ongoing tariff negotiations.
While Toyota possesses the financial strength to endure this economic storm, its reliance on Japanese parts and imports is straining its resources during U.S.-Japan trade talks. Despite the U.S. imposing 25% tariffs on automobile imports, as well as vehicle parts and key materials like steel and aluminum, the Trump administration has offered some trade relief, such as reimbursements for U.S.-assembled model components. Nonetheless, Toyota faces a monumental challenge, having already projected a $1.2 billion profit decline within two months.
Toyota is taking steps to mitigate consumer impact by refraining from immediate price increases on U.S. models, thus shouldering the losses. The company has a strong manufacturing presence in the U.S., with 11 plants producing models like the Camry, Corolla, and Tundra. However, popular vehicles like the RAV4 and Tacoma are assembled in Canada and Mexico, while Lexus models largely remain Japanese imports. The ongoing trade negotiations’ outcome could reshape Toyota’s and other Japanese automakers’ destinies, leaving many to wonder how long Toyota can endure without passing on costs to consumers.
LG Energy Solution Expands with Acquisition
In a significant move, LG Energy Solution, now the prominent EV battery manufacturer in North America, has acquired General Motors’ Ultium Cells plant in Lansing, Michigan. The $2 billion deal marks another step in LG’s strategy to dominate the EV battery market in the region.
General Motors exited the project in December, and LG has since sought new clients. Toyota’s agreement to transfer a substantial order to the Lansing plant paves the way for LG to cater to a burgeoning demand for hybrid and electric vehicle batteries. LG’s collaboration extends beyond GM, with joint ventures involving Hyundai and Honda in Ohio and Georgia.
The expansion underscores the broader ambitions of the U.S. EV battery industry, aiming to localize supply chains and lessen dependence on Chinese raw materials.
Polestar’s Resurgence Amid Industry Challenges
Swedish automaker Polestar has shown promising signs of recovery, nearly doubling its revenue and enhancing its gross margins by 14.5% in the first quarter. Although still navigating financial losses, Polestar’s situation has improved, thanks to increased sales volume and a favorable product mix shift.
With global deliveries up 76% to over 12,000 units, largely driven by models like the Polestar 2 electric crossover and Polestar 3 SUV, the brand is poised for a promising trajectory. The U.S.-China agreement to temporarily reduce tariffs offers further optimism, potentially aiding the Polestar 2’s re-entry into the U.S. market before potential tariff hikes.
Will Toyota Prices Rise?
Amidst these developments, consumers are left to ponder: Will Toyota models remain affordable, or are price hikes on the horizon? Toyota’s renowned reliability and resale value remain attractive, but the shadow of tariffs looms large. Share your thoughts on possible price increases and whether you’d still choose Toyota under these circumstances.
For further insights and updates, reach out to us at tips@automotive.fyi, or on Twitter @automotivefyi.
William Kouch, Editor of Automotive.fyi
