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Valeo and Forvia, two leading French car suppliers have warned they would be unable to absorb the costs of US President Donald Trump’s tariffs, which are set to hit Europe’s struggling automotive supply chain.
Trump on Thursday threatened to impose 25 per cent tariffs on EU goods, including on the car sector. The threat comes as the industry waits for a US decision on similar duties on goods from Canada and Mexico.
“There are no margins in the car industry and in particular among car suppliers to absorb even a part of these tariffs . . . I don’t know what the carmakers will do,” said Christophe Périllat, Valeo chief executive, on Friday.
He added that the costs would be passed on to clients, a point reiterated by Patrick Koller, his counterpart at rival Forvia.
Koller said at a results presentation that Forvia faced significant tariff risk for its operations in Mexico. “We’re almost absent in Canada . . . but we’ve got significant flows from Mexico to the US,” he said.
The tariffs threaten to hit an industry already weighed down by a slowdown in demand for cars and an expensive transition towards battery-powered vehicles, amid growing competition from Chinese EV start-ups.
Shares in Valeo dropped 15 per cent and Forvia fell almost a fifth on early trading on Friday. The businesses reported falling profits on Thursday evening and Friday morning respectively. Both businesses said that they expected largely flat sales in 2025.
Shares in German automotive suppliers Continental and Schaeffler, which in recent years have shed thousands of jobs, on Fridays sunk nearly 2 and 3 per cent, respectively.
Both business leaders said there were limits to how much they could adapt to tariffs, if Trump follows through on his threat to raise trade barriers with America’s closest neighbours.
Despite the warnings from the executives, it is unclear to what extent the companies could negotiate higher prices with the carmakers they supply. They both work with European, Asian and American carmakers.
“We can’t adapt in terms of industrial footprint or the footprint of our suppliers in the space of a few days or months; that takes years. In the US, we’ve got a historic base with experienced factories,” said Périllat.
“Today, we’re trying to understand because it’s complicated and it changes every day,” he added.
Europe’s automotive supply chain has seen increasing levels of job cuts as companies have turned to cost-cutting for survival. Lay-offs by European car suppliers doubled across the continent in 2024, according to figures from the European Association of Automotive Suppliers. Some 11,000 jobs were last year lost in the German sector alone, according to industry group VDA.
Margins for traditional automotive suppliers fell an average of between 3 and 5 per cent in the five years to 2022, according to analysis by Lazard and Roland Berger, as companies took on large costs to develop products for electric cars and sales in Europe slowed drastically amid higher living costs.
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