A new import tax being proposed by the US House of Representatives could hit Land Rover harder than any other automakers. The UK-based firm builds all their US models overseas and uses few, if any, US sourced components. An auto industry study determined that on average, JLR would need to hike the price of its vehicles by $17,000 in order to make up for the additional costs imposed by the border tax.
In comparison, the second most-affected company according to the study would be Volvo, at $7,600 per vehicle, followed by VW at $6,800 on average. At the other end of the spectrum, Ford and Tesla would be the least affected. Ford vehicles would only need to jump in price about $282, while Tesla may actually be able to avoid any increase.
The study was carried out by industry researcher Baum & Associates LLC. According to Alan Baum, the founder of the Michigan-based firm. The study results aim to “show the relative impact of the tax plan on each automaker.”
“The plan results in a net cost for automakers,” Baum said by phone. “Each company will then make its own decisions on pricing in order to best compete and maximize its profits.”
The report includes accounting for imports of both finished vehicles and parts for domestic cars that are made overseas. Some automakers are already beginning to consolidate manufacturing in the US and that trend will likely continue regardless of whether the border tax becomes law. Some manufacturers, including JLR, that rely solely on imports, may find that it makes more sense to move some aspects of production to the US.
According to the report’s authors, the border tax in its current form could lead to the production of an additional 1 million vehicles in the US, and up to 50,000 more jobs. Another study, by an analyst at UBS Securities LLC, suggests that average car prices in the U.S. could rise by about 8 percent, or $2,500 per vehicle. With that comes a potential reduction in annual sales of about 2 million vehicles.
The UBS analyst expects a draft bill to be released by Washington in late February or early March. Though he also gave it a less than 50 percent chance of being enacted, passing easily in the House of Representatives, and very unlikely to pass the Senate vote.
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