There’s One Clear Winner From the 25% Car Tariffs: BYD, the Epitome of Everything China Has to Gain

While it’s hard to predict when it’ll end, the ongoing situation in the financial markets due to President Donald Trump’s tariff policies will likely be recorded in history. Only time will tell whether this period will be remembered as a mere anecdote or as a defying chapter.

In the end, something has changed in the global automotive market since April 2, representing a potential disruption to the industry as we’ve known it. Chinese automaker BYD faces a unique opportunity.

A disruptive tariff. Ford CEO Jim Farley described the situation as “a hole in the U.S. industry that we’ve never seen.” Since April 2, the U.S. applies a 25% tariff to imported cars. This substantial increase in cost either makes each vehicle significantly more expensive or drastically reduces the profit margins for companies if they choose not to raise prices.

Additionally, the U.S. is also taxing parts used in the manufacturing of these cars. For instance, if a car is produced in the U.S., it incurs higher costs due to tariffs on components such as engines, transmissions, or any other parts manufactured outside of the country. Moreover, there’s an additional 25% tariff on crucial materials like steel and aluminum, which are essential for car production.

A complex situation. Experts have warned that it’s unrealistic for the U.S. to quickly attract a complete supply chain for all the vehicles it imports, which is the primary goal of these tariffs.

Producing a simple piston is complex, with the production process taking place in the U.S., Canada, and Mexico. Farley’s comments underscore concerns from a company that, next to Tesla, produces the most vehicles in the U.S. The potential impact of this scenario is significant. What will be the consequences for companies like General Motors?

In 2024, the U.S. imported $475 billion worth of vehicles and automotive parts. In 2025, it’s estimated that about half of that figure will be vehicles. 50% to 60% of them will be imported from Europe. It’s no coincidence that the European Union is already discussing the possibility of lifting tariffs on industrial goods.

First consequences. In this scenario, one possible solution is to raise prices. It’s estimated that, on average, an American will pay between $5,000 and $15,000 more per car purchased, depending on the base price of the vehicle.

Given this increase, it’s hard to imagine that manufacturers will be able to sell the same number of cars as they do now. According to Bloomberg, Mercedes is considering discontinuing the sale of the Mercedes GLA, one of its smallest vehicles, which typically has a lower profit margin.

Stellantis is already taking action. The Dutch automaker recently announced the temporary layoff of 900 employees. It’ll also close a factory in Ontario for two weeks and another in Toluca in Mexico for the entire month of April. Additionally, Toyota, which has already been reducing production in the U.S., is slowing down operations in Mexico. Volkswagen has halted shipments from Mexico and Europe, according to Automotive News.

Largest manufacturers. Toyota, Volkswagen, and Stellantis are among the companies that have announced measures to fight Trump’s tariffs. Together with General Motors and Hyundai/Kia Group, they make up the five largest carmakers for 2024.

With 4.27 million units produced, BYD was close to entering this group, making it the world’s sixth-largest producer. The forecast for this year is 5.5 million units, which would have been enough to surpass Stellantis’ 5.41 million units in 2024. It would’ve also put General Motors, with nearly 6 million units, within reach.

Negative forecasts. Stellantis was already facing a challenging situation in 2024. In fact, it was expected to manufacture 6.40 million cars in 2023, but issues–especially in the U.S.–prevented it from achieving this goal. General Motors also experienced a slowdown in 2024, producing nearly 200,000 fewer cars than the previous year.

Both companies are particularly affected by the 25% tariffs on automobiles. Stellantis manufactures 57% of the cars it sells in the U.S., while General Motors does so for 52% of its vehicles. A significant portion of their production has been shifted to Mexico and Canada, where Stellantis and General Motors produce 39% and 30% of their cars, respectively.

Notably, Canada has warned the U.S. that it’ll impose 25% tariffs on cars exported to the U.S. Canada imported an estimated $15.5 billion worth of vehicles from the U.S. in 2024.

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Toyota and Volkswagen. General Motors and Stellantis are significant players in this situation because their production levels are the closest to BYD. However, it’s expected that Toyota and Volkswagen will encounter very difficult economic conditions if the U.S., Japan, and the European Union don’t reach an agreement.

In 2024, Toyota sold 2.33 million cars in the U.S., with only 1.27 million produced domestically. Volkswagen sold more than 1 million cars last year in the U.S. 80% of the vehicles it sells in the U.S. would be impacted by import tariffs, potentially raising the prices of cars made in the country.

The right timing. The current global automotive landscape couldn’t be more favorable for BYD. The Chinese automaker doesn’t produce vehicles for the U.S. market or manufacture within its borders, leaving it with an untapped market.

Additionally, it’s likely that competitors will sell fewer cars, face higher prices, and experience reduced profits. In other words, they’ll become weaker in regions where China is growing, such as Europe and emerging markets. China became the world’s largest car exporter in 2023. It continues to widen the gap with Japan, which has historically been the leading country in this sector.

The key factor. Chinese cars have traditionally competed on price. They’re cheaper than their competitors and offer more comprehensive features. If Volkswagen Group, Stellantis, and Toyota are forced to raise their prices to offset their American performance, Chinese manufacturers will have a substantial opportunity in Europe.

This opportunity is particularly evident for BYD with its plug-in hybrids, which are currently performing well in countries where the company is targeting lower-cost vehicles. Motor Generals also stands to benefit.

BYD plans to export 800,000 cars outside of China in 2025. This is double the amount it’s exported so far. Achieving this goal relies heavily on its performance in Europe, Australia, Thailand, and several South American nations.

Image | P. L.

Related | BYD Surpassed the $100 Billion Revenue Mark in 2024. Tesla Is Still Far From This Feat