US Tariffs Spark Multi-Billion Euro Losses for Carmakers

European Automakers Brace for Further Impact as Trade Dispute Escalates

Mounting import duties imposed by the United States are already inflicting significant financial damage on major European automakers. Volkswagen and Stellantis are reporting billions in losses, raising concerns about jobs across the continent.

Automotive Giants Face Financial Strain

Retaliatory measures from the US have European car manufacturers on edge. With a 27% tariff on EU-imported cars already in place since April, a potential additional 30% from August could push the total duty to an alarming 57%. This steep increase could add tens of thousands of euros to the price of vehicles exported to the American market.

An analyst from Slovenská sporiteľňa, Matej Horňák, noted the potential consequences. He stated, Models that are exported from the EU are mostly more expensive models where consumer sensitivity is slightly lower. Nevertheless, we assume that there would be a significant downturn in Slovakia.

Stellantis and Volkswagen Report Substantial Losses

The Stellantis group, which operates a plant in Trnava, Slovakia, has been among the first to feel the sharp edge of these tariffs. According to BBC reports, the company has already incurred losses of 300 million euros. Stellantis anticipates its total losses for the first half of the year could reach up to 2.3 billion euros.

However, the Trnava facility is not currently in immediate danger. A spokesperson for Stellantis Slovakia, Michal Michal, confirmed for STVR, Approximately 80 percent of our production is directed to Western European markets and we do not explore the US. So we do not expect any direct impact of US duties on the Trnava plant.

Volkswagen Adjusts Strategy Amidst Tariff Pressure

German automotive giant Volkswagen is also grappling with the financial fallout, experiencing a 1.3 billion euro impact in the first half of the year, as reported by CTK. The group’s overall operating profit saw a 33% decline, settling at 6.7 billion euros, with the second quarter bearing the brunt of this downturn, showing a 29% year-on-year profit decrease.

Consequently, Volkswagen has revised its full-year outlook, now forecasting lower sales and profit margins. The company attributes these adjustments not only to the trade dispute but also to the increasing sales of lower-margin electric vehicles and ongoing restructuring costs.

Oliver Blume, CEO of Volkswagen, emphasized the need for swift action. We have to speed up our austerity measures. We cannot assume that the duty situation is only temporary. While Slovak factories are not directly threatened at this moment, a potential 10% drop in orders could lead to production cuts. The implementation of ‘Kurzarbeit,’ or short-time work schemes supported by financial aid, is being considered as a potential solution.

Ongoing negotiations between Brussels and Washington could offer a reprieve. Diplomats suggest that the controversial 30% tariff might be reduced to 15% if a compromise is reached. Should these discussions fail, the European Union has indicated its readiness to retaliate with its own 30% duties on US goods valued at up to 93 billion euros.

The automotive sector is a significant contributor to the European economy, employing millions directly and indirectly. For instance, in 2023, the European automotive industry generated an estimated €475.8 billion in added value, underscoring the potential ripple effects of these trade tensions across the region (ACEA 2023).