Affect of Steel and Aluminum Tariff on New Caterham Kit Pricing?

[Rustler]

I'm have a substantial deposit on a new Caterham kit/build coming up, with a delivery date around late summer or fall (when final pricing with exchange rate, duties and tariffs etc... will be calculated).  The contract is express that I bear increased cost of any applicable new tariffs.  Of immediate concern is the tariff on steel and aluminum and derivative products from the U.K. set to go into effect on March 12.  Adding to the murky picture is the announcement this week of a possible 25% tariff on all automotive imports, to be announced April 2nd.  

 

Does anyone here have some insight into how the present steel and aluminum tariffs will effect Caterham pricing (assuming the tariffs stay at current 25% levels)?  As near as I can tell, you pay the tariff on the value of the steel and aluminum components of the finished product.  The example I saw in one financial journal was that the average car has 1,000 lbs of steel and aluminum at a market rate of about $6k, so that would result in an increase of about $1,500 for an average size car, less for the diminutive Caterham.  But if it's on the whole product, that is a very different figure.  Further, the 25% tariff on all autos is more straightforward in application, but would probably be a deal breaker for me.  

 

Will the tariffs ever be applied, or are they threats as leverage, something we've seen in the past?  Even if they are applied, will they last until August of September?  

 

I am incredibly excited about this order and build, and I'd probably just absorb an added $1,500 and lick my wounds and move on, but an additional 25% isn't something I'm willing to choke down.  This feels near impossible to predict, and I'm very bummed to possibly have to make the decision not to move forward because of the risk, even if it ultimately doesn't happen.   

 

Any insight here would be welcome.

[MV8]

It is leveraging to get something closer to equal tariffs (or free trade with no tariffs). If or when takes two. Upset constituents of foreign states is a significant factor. Your ship date should be far enough out for this to work itself out.

 

   

Edited February 23 by MV8

[Croc]

6 hours ago, Rustler said:

Any insight here would be welcome.

 

 

 

 

What little has been published on these threatened tariffs has concentrated on completed autos, trucks and the like.  No mention of what will happen to auto parts has been made so we can only speculate.   But logically for the tariff to work the way the government seems to want, it has to include auto parts - which is what your Caterham will be when it enters the USA.  The big auto manufacturers have taken the position that auto components and parts will be subject to any tariff. 

 

Now its a matter of whether they will come in or not?  It was always a negotiation ploy to get something the Trump administration wanted, which seems to be immigration related in this instance.  What is not clear is whether he will force the tariffs in anyway to restructure the US economy inwards and disconnect its global trade links in the affected areas.  I get the other countries will retaliate with tariffs and it ends up being a zero sum game.  That does not help you since you pay the tariff.

 

Its a gambling problem for you, just as it is for everyone else and the businesses in this predicament. 

 

When is your final payment date?  Trying to see where that is relative to what is published out there on possible tariff application dates?

[theDreamer]

I have a friend that runs a parts and restoration business. He was informed by his broker that tariffs have already increased on parts coming into Canada from the US and vice versa. So, he has stopped doing business, both buying and selling with the US.

I do not know for sure what will happen in the near future or long term. However, my instincts are that it will not be good for the average person in either country.

Sorry but if you really want the car you’ve ordered you should be prepared for a worse case scenario.

These new unknown costs may be what are driving prices in the used Caterham market.

[Rustler]

 

Helpful thoughts here, thank you @mv8 and @croc   

 

My gut says that rates as high as 25% across whole countries (Mexico/Canada) or whole industries are leverage for concessions for equal tariffs from trade partners or other unrelated objectives, and won't either take effect or won't be lasting if they do, but I am no expert, and that isn't my world.  As Croc said above, there is an element of gambling here. Gambling on things you don't really understand is never a great move.

 

My delivery date is around late summer or early fall, so lots of water under the bridge before then.  That could either give things time to settle down, or mean that I just it's that much harder to predict.  Hard saying, not knowing.  

 

A tariff on specific components like steel or aluminum that looked like 2 to 3% of total purchase price would stink, but I'd hold my nose because I really want this thing.  But 25% on the whole package would be a problem on several fronts (my budget, my own perception of what this is "worth", marital relations, etc...).  

 

4 hours ago, Croc said:

The big auto manufacturers have taken the position that auto components and parts will be subject to any tariff. 

 

Croc, when you say the big manufacturers "have taken the position" are you saying that they are interpreting the proposed tariff that way, or that they are advocating for the tariff to be imposed in that way?

 

[Croc]

1 hour ago, Rustler said:

 

Croc, when you say the big manufacturers "have taken the position" are you saying that they are interpreting the proposed tariff that way, or that they are advocating for the tariff to be imposed in that way?

 

 

 

They are interpreting the proposed tariff that way.  The administration has not actually stated that tariffs will be applied to auto parts.  They have just said it will be on autos.  Even then it is not clear if autos includes light trucks, heavy trucks, SUVs, etc.  The devil is in the policy definitions which probably have not been drafted yet alone contemplated in any depth. 

 

No US manufacturer has been advocating for tariffs.  It would be an absolute bear to restructure their Mexican and Canadian production lines for complete autos and more importantly auto components/parts.  Ford was talking this week about it being an inital $5B pre-tax charge to their bottom line.  Thats hefty.   A company like Dodge really does not have all that capital spare to waste given their products need updating in a lot of segments. 

 

Strangely enough, tariffs would somewhat suit Toyota (give a mild competitor advantage over its peer competitors) because they lucked out with their mix of production facility locations for their various models. 

[slowdude]

 Parts will be impacted. I'm curious to where production will shift.

I see Nissan, Honda, Toyota etc all shifting production from Mexico to elsewhere in the world for cheaper margins due to lower labor costs as they will have to pay the tariffs regardless.

 

In terms of lifting up NA/LATAM, I think this business plan missed the mark.