Worldwide Tariff of 25% on Automobile Imports Reaffirmed; 20%-30% Downside to Fair Values Reaffirmed

On April 2, US President Trump reaffirmed the implementation of a 25% worldwide import tariff on all automobiles and automobile parts imported into the US, with the exceptions related to the United States-Mexico-Canada Agreement, as initially announced on March 26. The automobile industry will not be subject to the reciprocal tariffs announced on April 2. Thus, we reaffirm our estimate of a negative impact of between 20% and 30% on our fair value estimates for no-moat auto original equipment manufacturers resulting from these tariffs. Despite the downward revisions under this scenario, we continue to believe that there is a sufficient margin of safety at current prices, as shares trade at a significant discount to our valuations. BMW and Mercedes export approximately 50% of their US production, which may be affected by retaliatory tariffs, possibly increasing the negative impact on our fair values.