US President Donald Trump announced 25% tariffs on automobiles and auto parts. The tariff applies only to the value of content made outside the United States. Tesla TSLA shares were up slightly on the news.
Why it matters: Tariffs will likely raise auto prices for consumers as automakers pass along increased costs. Tesla should see less impact from this specific announcement, as the company domestically manufactures nearly all its autos sold in the US.
However, Tesla is not immune to tariffs. The company does source auto parts (including raw materials, such as steel and aluminum) from countries subject to tariffs, which will raise the cost to produce its vehicles.
The bottom line: We maintain our fair value estimate of $250 per share for Tesla. At current prices, we view the stock as fairly valued.
We view the latest tariff news as slightly positive for Tesla, as it will likely raise costs for the firm’s competitors by a larger amount. If all automakers raised prices to offset higher costs, Tesla would see less of a price increase, which could result in higher sales volumes.While this would help Tesla, it supports our view that the company will see deliveries begin to grow in the second half of the year. However, we still forecast deliveries will slightly decline in 2025, as we expect a first-quarter decline will not be fully offset by second-half growth.
Coming up: Tesla is set to report its first-quarter deliveries next week. Through the first two months of the year, deliveries are down in Tesla’s three key markets: the US, China, and Europe. We attribute much of the decline to consumers waiting for the new Model Y and its more affordable vehicle.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
