Volkswagen brand, Audi and Porsche said during the recent earnings call that it will try to find a “sweet spot” with regards to the tariffs. That’s a scenario where they pass on pricing without significant impact on sales volume. Considering that the tariff is an industry headwind, I expect all these brands to be able to pass on the tariff cost to customers with limited impact on sales volume. Audi and Porsche being luxury brands should be in a better position to do so and Volkswagen brand being an economy brand will not be able to pass on a large part of it. My base case assumes Volkswagen brand absorbs 80% of the cost, Porsche absorbs 50% and Audi absorbs 60%. My weighted headwind on operating profit is €4.4 billion (Worst case scenario: €6.9 billion, Best case scenario: €3.5 billion, Base case scenario: €4.4 billion).
The major headwind will come from Europe since vehicles imported there are mostly premium and luxury vehicles. Volkswagen Group exports around 243,000 units to United States from Europe (premium and luxury vehicles: 227,000) and 309,000 from Mexico. Europe and Mexico thus make up around 76% of Volkswagen Group’s exports to the USA. Volkswagen only produces around 175,000 vehicles in US, hence the headwind from the tariff on parts is minimal. Using Cox estimate of $500(€460), the headwind from the tariff on parts will only be €80 million.
@Magaly’s insights on how pricing and sales volume will develop as a result of the tariff will help me assess the impact better.