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Crunching the border tax numbers in the U.S. auto sector

Feb. 06, 2017 12:49 PM ETFord Motor Company (F) StockTTM, F, GM, TM, HMC, BMWYY, NSANY, MBGAF, TSLA, GELYF, FUJHY, MZDAY, VWAGYBy: Clark Schultz, SA News Editor101 Comments
  • Baum & Associates pushes pencil to paper to estimate that automakers would need to lift vehicles prices by thousands of dollars per vehicle to counterbalance a border adjustment tax. Ford (NYSE:F) and General Motors (NYSE:GM) are seen at the lower end, with estimated price hikes of $282 and $995, respectively. Tesla (NASDAQ:TSLA) could be mostly unaffected by a border adjustment tax due to its U.S. manufacturing focus.
  • Meanwhile, the forecast for Volvo (OTCPK:GELYF), Volkswagen (VLKAY) and Jaguar Land Rover (NYSE:TTM) are on the extreme high end, with prices increases of $6K to $10K seen as needed to recoup a border tax cost.
  • Barclays also tackled the border tax issue in a note published Friday.
  • Barclay's Detroit Three border tax breakdown:  "Ford has a higher mix of its NA unit production in the U.S. vs. FCA and GM. But the starker difference lies in the estimated value of U.S. net imports – we estimate only $3.6bn for Ford, vs. $10.4bn for GM and $18bn for FCA. Indeed, Ford is largely importing low-value small/mid cars from Mexico, vs. FCA and GM, which manufacture high-value pickups in Mexico and CUVs/minivans in Canada."
  • The firm rates Fiat and GM at Equal-weight along with the broad U.S. auto and auto parts sector, but has Ford positioned with an Overweight rating.
  • Related stocks: HMC, TM, OTCPK:NSANY, OTCPK:DDAIF, OTCPK:BMWYY, OTCPK:MZDAY, OTCPK:FUJHY.

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