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Bond Market News
Global Automakers Negatively Impacted by US Tariffs; Volkswagen Fights India’s $1.4bn Tax Demand
February 4, 2025
Global auto stocks dropped yesterday after US President Donald Trump announced new tariffs that could impact sales from factories in Mexico and Canada. Trump’s 25% tariffs threaten long-standing supply chains, especially for carmakers with production hubs in Mexico, which exports vehicles to the US. European automakers like Volkswagen (VW) and Stellantis, as well as luxury brands BMW and Mercedes-Benz, saw their stocks fall due to the impact on profitability and potential price increases. Analysts expect higher prices to offset tariffs, potentially reducing sales. In the Asia region, Toyota and Nissan saw declines while in the US, General Motors, Ford, and Tesla also saw declines. These companies’ bonds also traded slightly weaker across their curves.
In other news, Volkswagen has filed a lawsuit against Indian authorities to challenge their $1.4bn tax demand, arguing it contradicts India’s import taxation rules for car parts and could harm its business plans. The tax dispute involves Volkswagen’s practice of importing car parts separately to lower duties, which Indian authorities claim was misclassified to evade higher taxes on completely knocked-down (CKD) units. Volkswagen argues it followed government guidelines and received prior clarifications in support of its model. The dispute threatens Volkswagen’s $1.5bn investment in India and could undermine foreign investment confidence. If Volkswagen loses, it could face up to $2.8bn in penalties.
VW’s Perps were down by 0.1-0.3 points with its EUR 7.5% Perp down at 108.4, yielding 4.87%.
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