Auto Tariffs Relaxation Brings Relief, but Inflationary Pressures Persist
In a medium-term perspective, not only are auto tariffs being relaxed, but overall, other tariffs across sectors are also easing inflationary pressures in the US. Jay Kale, from Elara Capital, explains that while the US was initially expected to lead in growth, other regions were expected to be weak. However, the US is now expected to falter, and Porsche has cut its guidance, signaling uncertainty and potential demand slumps.
Despite the relief, the devil is in the details. The exact contours of the relaxation are still unclear, and cost pressures are expected to ease off for OEMs and suppliers. However, the overall outlook remains challenging, with global auto markets facing tumultuous times.
Porsche’s Guidance Cuts Signal Uncertainty
Porsche’s guidance cuts indicate uncertainty, which will likely lead to a demand slump in the coming months. There has been some pre-buying in the US, but with expected price increases, demand will likely decline. The US was the region that was doing well, supporting global growth, but Europe and China are now weak.
Trump’s Order to Avoid Levy Stacking
The order to avoid levy stacking is early days, and its impact on supply chain costs and consumer sentiment remains to be seen. However, the slowdown in demand is expected to hit suppliers more than individual companies, as it varies by supplier, component, and OEM.
Auto Major Numbers Show Mixed Sentiment
Maruti and TVS, among the large players in the auto space, have reported mixed sentiment. While TVS is optimistic about the two-wheeler industry, Maruti’s passenger vehicle demand is expected to grow by 1% to 2%. The preference is for two-wheelers, followed by passenger vehicles, and then commercial vehicles.
In summary, while some relief is coming from auto tariffs, inflationary pressures persist, and the overall outlook for global auto markets remains challenging.
Reference : https://economictimes.indiatimes.com/markets/expert-view/us-auto-tariff-relief-brings-temporary-respite-for-oems-but-uncertainty-looms-jay-kale/articleshow/120759473.cms
