‘Build them here!” came the battle cry from President Trump last week as he threatened to impose a 20 per cent import tax on cars made in the European Union. It was the latest in a tit-for-tat trade spat with the bloc, which began collecting tariffs on motorbikes, peanut butter, cigarettes and 200 other US imports that day.
Not that Mr Trump’s threat was new. A higher levy, of 25 per cent on all foreign cars, has been mooted by the commerce department, which is investigating whether automotive imports hurt America’s national security. This spurious justification is being used to collect tariffs on steel and aluminium imports from the EU.
Wilbur Ross, the commerce secretary, wants the car imports investigation finished by early August. It would come as no surprise if he recommended a 25 per cent levy. Mr Trump wants to return fire after the EU hit back against his metals import tariffs, and levies on EU cars are high up his list. Shares in the big European carmakers fell immediately after he made his threat.
About 17 million light vehicles were sold in the US last year, of which 23 per cent were imported. Of last year’s imports, 11 per cent came from Japan, 7 per cent from Europe and 4 per cent from South Korea, figures from Automotive News show. At present the US charges a 2.5 per cent tariff on imports of cars from the EU and 25 per cent on light trucks, while the EU charges 10 per cent on imports of all vehicles from the US.
Foreign carmakers that have limited US manufacturing operations would be hit hardest by unilateral tariffs. Jaguar Land Rover has no factories in the US. It makes 500,000 vehicles a year in Britain and a further 100,000 in China and Brazil. Volvo, the Swedish manufacturer, has no US factories, although it is building one in South Carolina.
Hyundai and Kia, of South Korea, respectively import 45 per cent and 65 per cent of the vehicles they sell in the US, a report by the credit rating agency Moody’s suggests. Their US production is limited.
Germany’s big three each import a significant volume of vehicles. Volkswagen imports about 80 per cent of its US cars, BMW about 70 per cent and Daimler 50 per cent, according to Moody’s. BMW and Daimler exporting about half of the cars they make in the US. They could tweak this mix or focus on models intended for domestic sale.
Japan’s Honda, Toyota and Nissan import a large volume of cars to the US while also exporting from there. Honda makes about 23 per cent of its cars in the US, Toyota about 21 per cent and Nissan 16 per cent. Exports to the US account for about 31 per cent of Nissan’s global production and 22 per cent of Toyota’s.
China’s Dongfeng, Geely and Beijing Automotive export only 5 per cent of their vehicles to the US.
General Motors, America’s biggest carmaker by sales, relies on imports from Canada and Mexico for about 30 per cent of its US sales. Further, GM assembles about half of its Silverado and Sierra pickup trucks in Mexico; it sold about 800,000 of these vehicles in the US last year.
Fiat Chrysler, formed by the merger of Italy’s Fiat and America’s Chrysler in 2014, makes about half of its vehicles in the US, with the rest imported from Mexico and Canada.
Ford has already felt the full force of Mr Trump’s threats. Last year it scrapped plans to build a $1.6 billion factory in Mexico after threats of sanctions. Imports from Canada and Mexico make up 20 per cent of its US sales. It plans to make its Focus Active in China for export to the US, but expects to sell less than 100,000 a year. Ford typically imports cars from overseas factories but is cutting US car sales in favour of trucks.
ADVICE Buy Ford
WHY Ford’s manufacturing strength on both sides of the Atlantic gives it an advantage over its rivals if there is to be a war on car tariffs
Macfarlane Group
Not many companies that have been listed on the London market since the 1970s fly under the radar of many investors (Greig Cameron writes).
Macfarlane Group has come a long way since Norman Macfarlane founded it as a stationery provider in 1949 with his £200 army gratuity. Lord Macfarlane of Bearsden, 92, who was ennobled for his corporate exploits and philanthropy, regularly attends the annual meetings.
The Glasgow company, which floated in 1973, now makes packaging and labels for a range of industries, with customers including QVC, Argos, Selfridges, Peak Scientific, Schneider Electric and Lakeland.
It is on a good run, gaining a greater market share in the online retail and third-party logistics sectors. Cardboard boxes and protective packaging have become unlikely product winners as part of the shift towards digital services.
In February Macfarlane reported pre-tax profit of £9.3 million for last year, a rise of 19 per cent and the eighth consecutive year it increased profits. Turnover last year was £196 million; the dividend increased by 8 per cent to 2.1p per share.
Arden Partners, the house broker, expects turnover to hit £214 million this year, with profit at £13 million.
Macfarlane has been bolstering its organic growth with a steady stream of acquisitions. It believes that the UK sector is ripe for further consolidation and is looking at a number of potential takeovers.
The company employs more than 800 people at dozens of depots around Britain and has a presence in Europe and the United States.
Peter Atkinson, chief executive, oversaw the building of an innovation lab in Milton Keynes where customers can work with the company on bespoke packaging designs and look at ways to reduce costs. It opened two years ago and Mr Atkinson believes the £300,000 investment was well worth it.
Macfarlane’s shares are up more than 40 per cent this year and have almost trebled since 2015. The company has prudently managed its debt and trimmed its pension deficit. That leaves it with enough flexibility to fund further acquisitions and increase returns to shareholders.
ADVICE Hold
WHY Steady and consistent growth. Further dividend rises are expected
