US tariff threat raises costs for UK car exporters and finance providers

Core Viewpoint - Proposed US tariffs could significantly increase costs for UK car exporters and motor finance providers, adding pressure to manufacturers and lenders in a subdued domestic economy [1][2] Group 1: Tariff Details and Implications - President Donald Trump has proposed a 10% tariff on goods shipped to the US from the UK and several European countries starting February 1, which could rise to 25% by June unless a broader agreement is reached [2] - The tariffs are expected to affect pricing, demand, and investment decisions across the automotive supply chain, with economists noting that the burden of tariffs is typically shared among consumers, manufacturers, and finance providers [2][3] Group 2: Impact on Automotive Sector - Higher vehicle prices due to tariffs may dampen US demand, and attempts to absorb costs could negatively impact profitability and cash generation, especially for exporters reliant on premium models [3] - UK automotive exports are heavily concentrated in manufacturing, with the US being the second-largest market, accounting for nearly 20% of exports last year, primarily consisting of premium and luxury vehicles [5] Group 3: Motor Finance Sector Concerns - Motor finance firms are concerned about residual values and volume assumptions, as UK-built vehicles sold in the US are critical for leasing and personal contract purchase products [4] - A sustained decline in US demand could weaken used car prices, prompting lenders to reassess risk [4] Group 4: Manufacturer Responses - Bentley is evaluating the tariff announcements and supports open markets, indicating that any imposed tariffs would likely be passed on to consumers [6] - Other UK manufacturers with significant US exposure, such as Aston Martin, Rolls-Royce, and McLaren, heavily rely on North American sales, while Jaguar Land Rover has previously noted that US tariffs have a direct impact on profitability and cash flow [7] Group 5: Broader Industry Effects - High-volume manufacturers like Nissan and Toyota, which primarily build cars in the UK for European markets, have limited direct exposure to the tariffs; however, suppliers, logistics firms, and captive finance arms could still be affected by production slowdowns or reduced investment [8]