Investing.com -- The Stoxx 600 autos and parts index has recorded a 4.3% decline as of 11:13 a.m. in Frankfurt, outpacing the broader market's drop of 1.4%.
Leading the downturn are Stellantis (NYSE:STLA), Mercedes, and Volkswagen (ETR:VOWG_p), which have seen significant losses in index points.
Analysts, including RBC (TSX:RY)'s Tom Narayan, indicate that a permanent tariff on certain regions could have a substantial effect on earnings, particularly if original equipment manufacturers (OEMs) do not transfer these costs to consumers.
Despite this, analysts predict that OEMs will likely pass these tariffs onto consumers, which could result in lower sales volumes and a smaller hit to earnings before interest and taxes (Ebit).
The team of analysts also notes that OEMs could potentially shift production to the U.S. to mitigate the impact of these tariffs, although this move would be considerably more challenging for suppliers.
Many investors anticipate that these tariffs will be temporary, expecting a deal to be struck between the affected countries. However, if U.S. tariffs on the European Union (EU) proceed, German OEMs under the analysts' coverage could face an amplified impact.
This follows recent market trends, where Europe's car shares have experienced a decline as Volkswagen and Stellantis grapple with potential tariff challenges.
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