FORD'S BEST-SELLING PICKUP IN CROSS-HAIRS OF U.S. TRADE POLICY - REPORT

To reduce the weight and improve the fuel efficiency of its best-selling F-150 pickup truck, Ford (NYSE:F) has been using more imported aluminum in production, placing the popular vehicle at the center of President Trump's trade policy.

On Wednesday, the U.S. government imposed a 25% tariff on steel and aluminum imported into the U.S. in an effort to level the playing field for U.S. manufacturers. But since the U.S. produces little of the metal used in manufacturing, the tariffs are expected to result in higher input costs, subsequently raising the price of Ford’s (NYSE:F) F-150 by ~$400 per vehicle, according to The Wall Street Journal. Unless Ford (NYSE:F) passes along the cost to consumers, the tariff could have a similar impact as they did in 2018, potentially shaving $1B off Ford’s (F) bottom-line.

Each domestically-made vehicle contains ~500 pounds of aluminum, making the auto industry the largest users of imported aluminum. And even though the metal is rolled in U.S. factories, the raw material is imported from outside the country, with Canadian imports making up 75% of the material used in the U.S., WSJ reported. This is attributed to lower electricity costs in Canada, where smelters are largely powered by hydroelectric power plants.

And without access to cheap electricity, the U.S. will continue to rely on foreign producers, leaving the entire auto industry vulnerable. Although the F-150 has the highest concentration of aluminum, the tariff touches all automakers, especially EV makers (TSLA) who rely heavily on the lightweight metal in the body to compensate for heavy batteries.  

Fortunately, automakers like Ford (F) and General Motors (GM) have secured forward contracts for steel and aluminum that extend for several months, potentially delaying any price increases until summer if the tariffs remain in effect.

 

2025-03-12T13:25:26Z