Deutsche Bank: Tariff Burden In Auto Industry Will Be Shared, Just As It Was During COVID

Deutsche Bank said in a note late last week that the directional takeaways they had for the auto industry going forward were “relatively unchanged” and the firm shared detail on where it believes tariff impact will land.

In an analysis covering virtually every model sold in the U.S., the bank did warn however that the fallout from protectionist policy won’t be limited to foreign automakers—it will ripple through the entire automotive ecosystem, from suppliers to consumers.

According to Deutsche, the cost of new tariffs will be shared across multiple layers: original equipment manufacturers (OEMs), end consumers, dealers, and Tier-1 suppliers. While the bank initially assumed certain components might be spared, updated federal documents now suggest otherwise.

“All parts of the vehicle (including tires) are subject to tariffs,” the report states, walking back earlier assumptions that components like seats and airbags might be excluded.

This expanded scope increases cost exposure, especially as non-U.S. content appears more embedded in vehicle production than previously assumed. Even automakers like Ford, which are relatively well-positioned, source a significant portion of engine parts from Mexico (25%) and Canada (15%).

In the short term, automakers are expected to make tactical adjustments—reallocating production within U.S. plants, running extra shifts, and avoiding large capital expenditures. There’s also an expectation that OEMs may have to absorb some supplier costs, much like during the COVID-era supply chain crunch.

Deutsche Bank notes, “OEMs will need to step in and absorb the tariffs for some suppliers… similar to the dynamics during COVID.”

Longer term, the bank sees a potential wave of announcements around onshoring, especially as companies seek political goodwill with the current administration. However, such structural changes—relocating supply chains, building new factories, and hiring en masse—could take years to materialize, especially in a politically uncertain environment.

The real kicker may be on the consumer side. The average transaction price (ATP) of vehicles is expected to rise, with buyers absorbing part of the tariff cost directly. Deutsche Bank has already lowered its 2025 U.S. sales forecast (SAAR) to 15.4 million units, and warns demand could slide further in the second half of the year if price pressures intensify.

In terms of automaker exposure, Tesla and Ford are seen as better positioned, thanks to their North American sourcing and assembly footprint. GM and Stellantis face moderate impacts, though Stellantis benefits from U.S.-sourced parts despite more assembly in Mexico. Hyundai is expected to be among the hardest hit due to its supply chain configuration.

Deutsche Bank’s analysis suggests tariff execution has a chance to backfire—raising costs, squeezing margins, and hitting consumers already grappling with elevated car prices.

As the bank puts it, “The burden of tariffs will be shared”—just not evenly, and certainly not painlessly.

“Our conclusions have not directionally changed but we do think the scope of impact is larger both at a macro (consumer now needs to absorb potentially a barrage of tariffs beyond autos) and micro level (non-US content appears higher than initially expected).”