February 1 tariffs About the slave imported from Canada, Mexico and China.
Considering how many new policies are – some of the tariffs are put on hold before they entered into force – it is difficult to predict how companies will react. But there are probably major changes in the logistics of the supply chain, production decisions and sources of suppliers for raw materials.
One company that could be particularly vulnerable on tariff policy and their impact on trade negotiations is Tesla(Nasdaq: Tsla) – How the company operates in all three countries.
Let’s explore how tariffs can affect Tesla’s business and how the company can react.
Tariffs are taxes on imported or export goods, which governments often use as influence in trade relations. They can make companies pay more for materials from abroad. Higher costs can directly influence the growth of the company and harm profitability.
Especially for Tesla, information from the Ministry of Transport indicates that the company imports approximately 25% of its materials from Mexico.
On the surface, Trump’s tariffs look like a disaster for Tesla, as they could directly lead to the higher cost of vehicle production. On the one hand, this could lead to a decrease in the margin of profit for the company. On the other hand, Tesla could transfer these costs to the buyers of the vehicle in the form of price increase. In any scenario, Tesla’s prospects for growth face a vague road. But Tesla may be able to work around these new trade policies.
Picture source: Getty Images.
During Tesla’s invitation to make money in the fourth quarter in January, the company’s executive, Vaibhav Taneya, said that the uncertainty that the new tariff politics “would affect our business and profitability” would affect.
Keep in mind that Tesla is one of the fastest growing car manufacturers in the world and spent billions in capital expenditures (Capex) for constructing factories around the world.
In the annual submission of the company’s application since January, Tesla notes that it has “production facilities in China and Germany, which allows us to increase the accessibility of our vehicles for customers in local markets by reducing transportation costs and production costs and eliminating the impact of unfavorable tariffs.”
Tesla also plans to build a factory in Mexico.
So Tesla could avoid some Tarife damage could have at their job. How did Trump take an oval office last time Trump? Then the tariff also imposed.
During his first term, from 2017 to 2021, Trump imposed tariffs on good from China, Europe, Mexico and Canada.
On the lower charts you can see Tesla’s income, the costs of operating costs and profitability at the time.
While Tesla’s operating expenses (medium graph) began to burn around 2018, the company managed to go through that, as it indicated a slope down in the second half of 2018 and until 2019. Then the cost profile increased during 2020, shortly after the period was marked with a gray seat column. This is a really important point. The gray column indicates the recession of the covid-19. As a refreshment, the top pandemic days really made a number on the logistics of the supply chain and prices of goods.
The results mentioned above illustrate that Tesla’s job was actually able to do in line during Trump’s first term. The sale most continued to grow, while the company operated under much firmer cost controls. Free cash flow – although he was a bit bumpy – he coached upwards as a whole.
In addition, how did the Tesla section perform during Trump’s first stay in the oval office?
As shown on the lower chart, Tesla shares increased by more than 1,600% between 2017 and 2021. The only noticeable immersion occurred in early 2020 – again, the period marked at the beginning of the pandemic. However, the Tesla section has recovered strongly over the last months of 2020, as sales and profits have started accelerates.
Although history suggests that the Tesla section tends to show a high level of resistance, it is important to consider how the company can respond to this circuit of tariffs and what it could mean for investors in short and long conditions.
I think the trends explored above confirm Tesla’s decision to invest in other countries in an effort to command the even stronger economy of the unit in the main geographical demographics. I would not be surprised if Tesla responds to the latest circle of tariffs, accelerating their ambitions to build a factory in Mexico.
Although the short deadline is likely to come with a certain Volatility, I am cautiously optimistic that the company will be able to rely on its networks in China, Europe, and perhaps Mexico to alleviate some cost risks and continue to grow over the next four years and go out stronger in the long run.
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