General Motors churns out lucrative pickup trucks in Mexico, relying on its plants there to produce electric vehicles like the Chevy Blazer and Cadillac Optiq. With five major assembly plants in Canada and Mexico, Ford also leverages these countries for 12% of its manufacturing.
Bank of America’s auto analyst, John Murphy, raised concerns about the potential impact of tariffs on the industry, highlighting the limited capacity for swift adjustments within the US. He noted on Yahoo Finance’s Opening Bid podcast, “There’s a question of how fast you can react to that [tariff]. You don’t have a lot of extra capacity in the US to move.” The looming dilemma is how automakers will navigate potential price hikes to counterbalance tariff effects and whether this will dent consumer demand.
Kelley Blue Book predicts that if President Trump enforces 25% tariffs on Mexico and Canada, the average cost of a car could surge by $3,000, possibly driving consumers towards opting for more affordable used vehicles. In its recent earnings report, Ford adopted a cautious outlook for 2025, projecting adjusted operating profits between $7 billion and $8.5 billion, a decrease from last year’s $10.2 billion. Market expectations had centered around $8.3 billion, falling short of Ford’s projection.
Analyst Tom Naryan from RBC expressed skepticism about Ford’s 2025 guidance, suggesting that potential risks may not be fully accounted for in the current projections. Elevated inventory levels and the associated pricing pressures, coupled with impending launch costs and increased electric vehicle production impacting profitability, pose challenges for Ford. Consequently, Naryan reduced his price target on Ford to $9 from $10, maintaining a Sector Perform rating on the stock.
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