Auto tariffs: European front-loading of vehicles to U.S. seen as limited

Logistics service providers (LSP) to the automotive sector have resorted to front-loading to avoid 25% tariffs imposed on vehicles imported to the U.S., effective 2 April, but the volumes involved were not that significant, according to industry sources.

“There has been an increase in vehicle shipments to the U.S, but in the broader context, this has played a rather minor role. It was only a very short-term and limited opportunity to move a few additional units before the tariffs took effect. These are front-loading effects with limited overall impact on supply chains,” Frank Schnelle, Executive Director designate of the Brussels-based Association of European Vehicle Logistics, told AJOT.

“We’ll have to see how things develop further, and it will largely depend on the individual strategies of the manufacturers. In the coming days and weeks, we’ll have a clearer picture of the impact of the tariffs. Potentially, some OEMs could reduce production for export to the US,” he added.

As of 7 April, Jaguar Land Rover (JLR), one of the UK’s biggest automakers, has suspended shipments of its vehicles to the U.S. for a month-long period while contemplating how to mitigate the cost of the higher duties.

JLR is said to have built-up two months stock of cars in the U.S. This avoided the 25% tariffs. Almost one-quarter of the company’s annual production output is bound for the U.S. market and is worth £6.5 million. Some of the popular models Stateside are the Rover Defender and the Range Rover Sport.

Car-carrying vessels from the UK take an estimated 21 days to cross the Atlantic to the U.S.

Front-End Loading

Dutch bank ING’s senior sector economist, Transport and Logistics, Rico Luman, noted that auto liners, including Wallenius Wilhelmsen and Höegh, have indicated that car makers rushed to ship extra cars to the U.S.

“This has played a role (in avoiding the tariffs), although I don’t believe this has been massive, as the time between the early signals (that the hike in duties was coming) and enforcement was pretty short and it’s often not just a matter of re-directing deliveries (from other markets) as cars have regional specifications and preferred models are different,” he told the AJOT.

For car parts, front-loading may be more substantial as there’s more time, the 25`% tariffs on components not taking effect until 3 April, Luman explained.

“Also, the sourcing of parts isn’t that easy to redirect so this is set to continue this month. More generally, we have seen strong figures of container throughput at U.S. ports over the first months of the year.”

“Front-loading and having existing stock on the ground in the U.S. (with dealers) could indeed explain part of JLR’s decision to suspend shipments, but it also points to JLR and other automakers needing time to assess the impact and to recalibrate their prices, products and supply chain strategies: how much of the tariffs to pass on immediately, which models to focus on? In addition, U.S. registrations of new cars show front-loading on the consumer side as well, which will likely be part of the story.”

Meanwhile, according to media reports, Audi is holding vehicles at U.S. ports. These had arrived after April 2, when the 25% tariffs took effect.

The Volkswagen brand is thought to have a stock of around 37,000 vehicles in its U.S. inventory. That is enough to cover approximately two months of sales.