25% Tariffs on All Imports - Effect on Rivian prices?

[BTOR]

Curious if any Forum members have heard from Rivian Corporate how the new tariffs (assuming it doesn’t get recalled or postponed like several of the others) might have on Rivian. I know they are US built but I would think many of the parts, especially the electronics, are foreign supplied.

From what I understand, the tariff applies to the percentage of the vehicles cost which is made of foreign parts. So say $15k of the total cost to build a Rivian are foreign sourced parts, the tariff on a Rivian would be $3,750.

If anyone has other info or a different understanding please chime in.

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[Eric9610]

The way tariffs work on import is that the components are hit at that rate. I doubt Rivian has 15k in imported parts. This also only applies to the BOM cost of the imported good not the retail cost. In reality a 25% tariff should only net a ~10% retail price increase. If anyone says 25% on retail, they don't understand how these tariffs work.

 

[ukyank]

Curious if any Forum members have heard from Rivian Corporate how the new tariffs (assuming it doesn’t get recalled or postponed like several of the others) might have on Rivian. I know they are US built but I would think many of the parts, especially the electronics, are foreign supplied.

From what I understand, the tariff applies to the percentage of the vehicles cost which is made of foreign parts. So say $15k of the total cost to build a Rivian are foreign sourced parts, the tariff on a Rivian would be $3,750.

If anyone has other info or a different understanding please chime in.

You have to wait until the order is published in the Federal Register & Annex 1 is added that will list specific parts. As of now the parts are just vaguely “engines, transmissions, powertrain parts, and electrical components” that are not exempted by USMCA.

 

[BTOR]

The way tariffs work on import is that the components are hit at that rate. I doubt Rivian has 15k in imported parts. This also only applies to the BOM cost of the imported good not the retail cost. In reality a 25% tariff should only net a ~10% retail price increase. If anyone says 25% on retail, they don't understand how these tariffs work.

Yes, the $15k was just a WAG/example. But, it’s good to know it should be considerably less. It would be unfortunate if the tariffs had an impact on Rivian sales. Buy by the sounds of it, should it result in a price increase, it will be negligible.

 

[andrewgrhogg]

After encouraging ChatGPT to do a deep dive on rivian and the parts it makes and where those might be sourced, and then comparing all those to the USMCA rules, its belief is that the only major component in a Rivian that is going to not pass muster is the battery cells - and maybe some electronics and wiring. The risk is low for other components.

There is of course the steel and aluminum tarrifs, which will also apply. About 30% of US steel use is imported. Assuming this same % applies to Rivians suppliers, one might assume that about 30% of its steel will have a 25% tariff - or an 8% hit to steel COGS. Steel COGs probably make up about 5% of total COGS, so thats 8% of 5%. As you can see it gets complicated. Add in Aluminum COGs (44% imported) also at about 5% and you have a COGs increase for both those metals of about 1%. not huge...But then you have to do that same math across all the components...

And dont think Rivian will just tell its suppliers to source American aluminum and steel and eliminate tariffs. The price of that steel and aluminum will rise rapidly to the point where it is no cheaper than buying tariffed steel and aluminum - because supply will stay the same and demand will increase radically. This is the main thing people dont get about tariffs - domestic producers will raise their prices to match the higher prices of the foreign competition that now has tariffs. So the net result is that American producers will make more profit (maybe - depending on the price elasticity of demand!), and American consumers will pay much higher prices. If you dont believe me either go to your local CC and take Econ 101 or look at the prices of fridges etc when tariffs were last placed on them.

The net result will most likely be higher prices for all cars, lower sales for all car manufacturers (cars have a very high demand elasticity with respect to price), and layoffs at US automotive companies (due to lower sales) - despite the idiot at the head of the auto union thinking it will lead to job increases!

If you bought your Rivian recently then pat yourself on the back - you got a deal. If you're thinking about buying one - do it now, before prices go up.

 

[JackRussellRacing]

You have to wait until the order is published in the Federal Register & Annex 1 is added that will list specific parts. As of now the parts are just vaguely “engines, transmissions, powertrain parts, and electrical components” that are not exempted by USMCA.

I am in the auto parts industry. @ukyank is 100% correct. Until Annex 1 is published, it is difficult to know for sure. My personal guess is that the number HTS codes subject to these additional tariffs will be significant.

At a minimum, I suspect all of HTS code 8407, 8408, 8483 and a huge swath of previously tariff'd codes (for steel and aluminum products) will be affected. The impact will be far and wide.

My prayer is that April 2 is so disruptive for the 'finished automobile' sector, that everyone discovers their better angels quickly, and we never reach the beginning of May, when new tariffs on auto parts would begin.


(But then again...the concept of Chekhov's Gun is pretty powerful.)

 

[ediehl]

I was watching CNBC this morning and the very pro Trump host was speechless for the 1st time ever after having a conversation with their transportation expert and what it's going to do to the cost of vehicles. So glad I have 3 cars all under 2 years old although I would like to trade my R1T in for a gen 2.

 

[BTOR]

And dont think Rivian will just tell its suppliers to source American aluminum and steel and eliminate tariffs. The price of that steel and aluminum will rise rapidly to the point where it is no cheaper than buying tariffed steel and aluminum - because supply will stay the same and demand will increase radically. This is the main thing people dont get about tariffs - domestic producers will raise their prices to match the higher prices of the foreign competition that now has tariffs. So the net result is that American producers will make more profit (maybe - depending on the price elasticity of demand!), and American consumers will pay much higher prices. If you dont believe me either go to your local CC and take Econ 101 or look at the prices of fridges etc when tariffs were last placed on them.

Well put, thank you for sharing. Maximizing profit is the backbone of capitalism. When prices go up, for what ever reason, everyone who can will take advantage. We saw it when prices started to increase back in 2020 due to the pandemic. We saw prices increase on products that were shielded from the increases in materials, supply or distribution costs. They increased simply because they could. The companies that produced those products used the opportunity to increase the profit margins on those products.

 

[BigSkies]

After encouraging ChatGPT to do a deep dive on rivian and the parts it makes and where those might be sourced, and then comparing all those to the USMCA rules, its belief is that the only major component in a Rivian that is going to not pass muster is the battery cells - and maybe some electronics and wiring. The risk is low for other components.

There is of course the steel and aluminum tarrifs, which will also apply. About 30% of US steel use is imported. Assuming this same % applies to Rivians suppliers, one might assume that about 30% of its steel will have a 25% tariff - or an 8% hit to steel COGS. Steel COGs probably make up about 5% of total COGS, so thats 8% of 5%. As you can see it gets complicated. Add in Aluminum COGs (44% imported) also at about 5% and you have a COGs increase for both those metals of about 1%. not huge...But then you have to do that same math across all the components...

And dont think Rivian will just tell its suppliers to source American aluminum and steel and eliminate tariffs. The price of that steel and aluminum will rise rapidly to the point where it is no cheaper than buying tariffed steel and aluminum - because supply will stay the same and demand will increase radically. This is the main thing people dont get about tariffs - domestic producers will raise their prices to match the higher prices of the foreign competition that now has tariffs. So the net result is that American producers will make more profit (maybe - depending on the price elasticity of demand!), and American consumers will pay much higher prices. If you dont believe me either go to your local CC and take Econ 101 or look at the prices of fridges etc when tariffs were last placed on them.

The net result will most likely be higher prices for all cars, lower sales for all car manufacturers (cars have a very high demand elasticity with respect to price), and layoffs at US automotive companies (due to lower sales) - despite the idiot at the head of the auto union thinking it will lead to job increases!

If you bought your Rivian recently then pat yourself on the back - you got a deal. If you're thinking about buying one - do it now, before prices go up.

I've been trying to figure out some of these tariff things myself. It's pretty murky, and we really need to wait for guidance from Rivian. Here's what I've been able to guess at.

The broad outlines I've figured out is that steel imports vary heavily by use-case. Most of the steel used in automotive comes from the US, while the types of steel used by the oil & gas industry are nearly all imported.

So the automotive sector is theoretically less exposed to the steel imports.

However, on the flip side, I've heard plenty of reports that US steel makers raised their prices by ~30% the day the tariffs were announced, and didn't even wait for the tariffs to take effect. How much Rivian is impacted will depend on how much they have under long term contracts versus exposure to spot prices.

Aluminum is a different story. A lot of aluminum is imported, and there really aren't opportunities to bring that back to the US. It just ain't happening.

Batteries will be a big one. It's the most expensive component in an EV. Some components of battery manufacturing have been rapidly on-shoring, while other parts closer to the raw commodities will always be offshore. If you assume $100/kWh for final battery price, and guesstimate $50/kWh is the parts that can't be brought to the US, a 25% tariff will increase costs by ~$1,700 per vehicle for a 135kWh battery.

 

[Dark-Fx]

After encouraging ChatGPT to do a deep dive on rivian and the parts it makes and where those might be sourced, and then comparing all those to the USMCA rules, its belief is that the only major component in a Rivian that is going to not pass muster is the battery cells - and maybe some electronics and wiring. The risk is low for other components.

There is of course the steel and aluminum tarrifs, which will also apply. About 30% of US steel use is imported. Assuming this same % applies to Rivians suppliers, one might assume that about 30% of its steel will have a 25% tariff - or an 8% hit to steel COGS. Steel COGs probably make up about 5% of total COGS, so thats 8% of 5%. As you can see it gets complicated. Add in Aluminum COGs (44% imported) also at about 5% and you have a COGs increase for both those metals of about 1%. not huge...But then you have to do that same math across all the components...

And dont think Rivian will just tell its suppliers to source American aluminum and steel and eliminate tariffs. The price of that steel and aluminum will rise rapidly to the point where it is no cheaper than buying tariffed steel and aluminum - because supply will stay the same and demand will increase radically. This is the main thing people dont get about tariffs - domestic producers will raise their prices to match the higher prices of the foreign competition that now has tariffs. So the net result is that American producers will make more profit (maybe - depending on the price elasticity of demand!), and American consumers will pay much higher prices. If you dont believe me either go to your local CC and take Econ 101 or look at the prices of fridges etc when tariffs were last placed on them.

The net result will most likely be higher prices for all cars, lower sales for all car manufacturers (cars have a very high demand elasticity with respect to price), and layoffs at US automotive companies (due to lower sales) - despite the idiot at the head of the auto union thinking it will lead to job increases!

If you bought your Rivian recently then pat yourself on the back - you got a deal. If you're thinking about buying one - do it now, before prices go up.

/Me pats self on back several times

 

[BTOR]

/Me pats self on back several times

Do I count 4 R's in your driveway/garage? If so, you deserve double pats

 

[andrewgrhogg]

Thats some good math....So if battery is $1700 and all other components add another $1000 (spit ball number) then we might see prices go up $3k. However, if the price of most competing vehicles also goes up, and goes up more, then we can assume that Rivian, who is desperate for profit, will use the opportunity to raise prices more than that. Silverado and Hummer and all GM EVs will be produced state side - so they may see similar tariff costs to Rivian - in other words lower than others. Other vehicles are Defender (Slovakia), Land Cruiser (Japan), Jeep (Michigan), EQE/EQS (Alabama), iX (Germany), F150 (Michigan), Tundra (Texas), Ram 1500 (Michigan). In fact most competitors - if those are them, are produced state side...

I had ChatGPT give me a list of the top 10 pickup trucks by units (not $s) and where they are made. The top 5 are produced locally, the 6th is a Maverick, made in Mexico, and 7-10 is made in US. So only 1 out of top 10 made outside of US, and it probably conforms to the USMCA so wont be tariffed. Almost 80% of the top alone are produced state side, and only 6% of the top 10 are produced outside the US! ..So much for being "ripped off" by car companies producing trucks outside the US!

Looking at SUVs...the figures are a little different. 5 of 10 produced in US, one in Mexico (the top selling Rav4), one in Canada and then Japan, Korea...assuming the two in Canada and Mexico are USCMA compliant, only 3 will be tariffed.

Yes...its going to be convoluted and interesting...

 

[bigsky]

The way tariffs work on import is that the components are hit at that rate. I doubt Rivian has 15k in imported parts. This also only applies to the BOM cost of the imported good not the retail cost. In reality a 25% tariff should only net a ~10% retail price increase. If anyone says 25% on retail, they don't understand how these tariffs work.

Tariffs by and large increase the prices of goods. That is all I need and care to know or learn about tariffs. Everything else tariff is chaff.

 

[MacO512]

The way tariffs work on import is that the components are hit at that rate. I doubt Rivian has 15k in imported parts. This also only applies to the BOM cost of the imported good not the retail cost. In reality a 25% tariff should only net a ~10% retail price increase. If anyone says 25% on retail, they don't understand how these tariffs work.

I think a lot of what you say is true.

But Rivian is also going to have to hire a team of accountants and a law firm and many others to review and process all these tariffs. Those aren't cheap. So there will be a lot of costs to Rivian besides the direct tariff tax.

Can Rivian pass all of these costs or even more on to the consumer?

I think ultimately the cost the consumer pay for a Rivian that may increase will have more to do with the cost increase to the average automaker - and thus Rivians slot in the auto market price - than it will be the actual direct cost Rivian incurs. Rivian and all automakers will charge the most they can while moving the quanity of vehicles they want.

The actual tariff costs will more directly impact Rivian earnings and their stock market price than the price they sell vehicles at.

 

[Electrified Outdoors]

Talk typing so I apologize in advance for any typos. I doubt we will know which parts are affected and by how much. The actual vehicle is assembled here in the USA so there would be no tariff on the vehicle. What would happen is Rivian wood experience increased parts cost.

at that point, Rivian would have to decide if they are going to absorb the added costs or pass some or all of those added costs onto their customers.

The estimates floating around the industry currently are an increase in cost between 3000 and $8000 per vehicle for vehicle vehicles that are assembled in the USA.

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