{"text":[[{"start":11.49,"text":"Germany’s top three carmakers are set to have more than €10bn wiped off from their cash flows this year as US tariff costs add pressure to an industry already battling sluggish volumes and an influx of Chinese electric vehicles."}],[{"start":31.03,"text":"The car industry has been one of the hardest hit by Donald Trump’s trade war after the US president imposed 25 per cent tariffs on imports of foreign-made vehicles."}],[{"start":44.43,"text":"Analysts expect carmakers’ cash flows generated from their automotive business to be squeezed. They are likely to fall from €9.4bn last year to €3bn at Mercedes-Benz; from €7.1bn to €3.3bn at Volkswagen; and €4.8bn to €4.4bn for BMW, according to data from Visible Alpha."}],[{"start":74.31,"text":"The position could deteriorate further as analysts adjust their forecasts following results from BMW and Mercedes this week. VW on Friday cut its automotive net cash flow guidance for the year to between €1bn and €3bn, from its previous range of €2bn to €5bn."}],[{"start":99.1,"text":"The tariff fallout has not been fully reflected in second-quarter results, because some carmakers stocked up and worked their way through their pre-tariff inventory while awaiting the outcome of trade talks."}],[{"start":113.33999999999999,"text":"However, higher tariffs will mean rising costs for exporting to the US, procurement of parts as well as supply chain adjustments, which would put pressure on cash flows."}],[{"start":125.92999999999999,"text":"“The question in my mind is: do we take comfort from the fact that the tariff impact in the second quarter is less than we first feared or is this a false sense of security?” said Michael Tyndall, senior global autos analyst at HSBC."}],[{"start":144.06,"text":"Volkswagen, Mercedes-Benz and BMW are already paying a 27.5 per cent tariff for many shipments to the US from countries such as Germany and Mexico."}],[{"start":null,"text":"
"}],[{"start":157.85,"text":"On Friday, VW revealed a €1.3bn tariff hit in the second quarter and predicted the burden would increase to several billion euros if the car tariffs were not lowered. It had negative net automotive cash flow of €523mn in the second quarter."}],[{"start":180.13,"text":"General Motors surprised investors when it said tariff costs were likely to be bigger in the third quarter than the $1.1bn reported during April to June, as it warned of up to $5bn in annual impact. "}],[{"start":197.03,"text":"Analysts expect GM’s adjusted free cash flow for its car business for the year to halve to $7.7bn from $14bn."}],[{"start":210.22,"text":"Stellantis has said it would take a €300mn hit from Trump’s tariffs during the first half, but conceded the impact in the second half would be bigger as it expects up to €1.5bn by the end of the year."}],[{"start":228.95,"text":"Tesla faced $300mn in additional tariff-related costs in the second quarter and warned this figure would increase through the year."}],[{"start":240.13,"text":"In May, BMW bullishly predicted that US tariffs would be lowered from this month. While Washington has not yet reduced the levies, people close to the talks have told the Financial Times that the EU and US are closing in on a trade deal that would set the tariff on European car imports at 15 per cent."}],[{"start":264.15999999999997,"text":"However, for the carmakers, costs are already rising as suppliers, which have slimmer profit margins, have swiftly managed to pass on higher tariffs not just on foreign-sourced components but also on materials such as aluminium and steel."}],[{"start":282.84,"text":"Among suppliers, Swedish seatbelt and airbag maker Autoliv raised its annual guidance on sales to reflect the tariff payments following a record second quarter."}],[{"start":296.47999999999996,"text":"“We successfully recovered approximately 80 per cent of the tariff costs during the second quarter, and expect to recover most of the remaining portion later this year,” its chief executive Mikael Bratt said."}],[{"start":312.08,"text":"Thomas Besson, head of autos research at Kepler Cheuvreux, said European automakers have accumulated rich cash piles following the sales surge and higher vehicle prices the industry enjoyed after the Covid-19 semiconductor crisis. At VW, Mercedes-Benz and BMW alone, their industrial liquidity is over €100bn, meaning the €10bn hit can be absorbed in the short term."}],[{"start":340.81,"text":"Nevertheless, pressure on their cash positions and profit margins comes at a time when companies such as VW face the need to restructure, in order to bring down their excess capacity at their factories and fix their cost structure to compete against BYD and other Chinese rivals."}],[{"start":363.41,"text":"“Some companies are still buying back shares when maybe they shouldn’t. They are pretending that everything is fine when everything is not fine,” Besson said. “They are leveraging this silver lining of a strong cash position but they might be consuming it too fast rather than using it more wisely.”"}],[{"start":386.66,"text":"Mark Wakefield, global automotive market lead at AlixPartners, said carmakers were likely to pass on 80 per cent of the tariff costs, which he estimated would total $30bn on the basis that trade deals for lower levies would be reached with Europe, Mexico and other countries."}],[{"start":409.70000000000005,"text":"As making cars more expensive for American consumers would be politically sensitive, he said companies may choose to raise prices more discreetly by reducing sales discounts and changing the financing terms for leasing."}],[{"start":426.78000000000003,"text":"While the tariff costs may be mitigated by raising car prices, Wakefield explained carmakers would still suffer “cash erosion in a different way from lower volumes” if consumer demand fell away with the rise in vehicles prices for potential buyers."}],[{"start":456.61,"text":""}]],"url":"https://audio.ftmailbox.cn/album/a_1753659581_1007.mp3"}