Driving Through the Storm: How U.S.-Germany Tariffs Are Reshaping Auto Investments

The U.S. auto industry is in the midst of a seismic shift. On July 7, 2025, German automakers face a 25% Section 232 tariff on vehicles and parts shipped to America, while reciprocal EU tariffs loom like a dark cloud. But here's the twist: this isn't just a story of losers. It's a tale of winners who've already pivoted to dominate this new landscape. Let's dive into the cost pressures, the supply chain reshaping, and the plays you need to make now.

The Tariff Tsunami: Who's Drowning? Who's Swimming?

The 25% levy on German-made cars and components has sent shockwaves through the industry. But not all German automakers are equally vulnerable. Let's break it down:

1. BMW: The Master of Resilience

BMW has been the poster child for smart U.S. localization. By Q3 2025, its Spartanburg, South Carolina, plant produces 30% of global SUV volume, including the X3, X5, and X7. This shift slashed its tariff exposure and leveraged Chancellor Merz's “tariff offset mechanism,” reducing liabilities by 3.75% of MSRP. The result? BMW's stock has outperformed peers by 15% since 2024.

Action Alert: BMW's U.S. focus and EV leadership (it's targeting 50% EV sales by 2026) make it a buy here. Watch for further margin expansion as U.S. production scales.

2. Daimler (Mercedes-Benz): The EV Gambit

Daimler's Tuscaloosa, Alabama, plant is cranking out luxury SUVs like the GLE and EQE electric SUVs. Its 47% share of Germany's EV market in April 2025 signals strong demand for its battery-powered models. But Daimler's stock has lagged peers due to heavy R&D spending on EVs. However, the IRA subsidy windfall for U.S.-made EVs could tilt the scales.

Play: Daimler's stock is undervalued at 9x forward EV/EBITDA. Buy on dips, but brace for volatility as it bets big on electrification.

3. Volkswagen: The Laggard's Lament

VW's delayed U.S. manufacturing strategy is biting. While its $21 billion U.S. expansion (including a Tennessee battery plant) is underway, luxury brands like Audi and Porsche remain tariff victims. Porsche's South Carolina plant won't open until 2026, leaving its 2025 exports fully exposed. VW's stock has underperformed by 20% vs. peers YTD.

Avoid: VW's reliance on European exports and slower U.S. reshoring make it a hold until 2027, when its tariff exposure declines.

The Supply Chain Shift: Where to Find Gold in the Tariff Mine

The real money isn't just in automakers—it's in the suppliers who've bet on North American reshoring. Here's where to look:

Continental AG (CON.DE): The Hidden Gem

This tier-1 supplier expanded U.S. production of electrified powertrains and components, reducing tariff exposure for automakers like BMW. Its P/E ratio of 12x is a steal vs. the sector's 18x average.

Buy: Continental's 2025 earnings could jump 20% as U.S. factories ramp up. This is a buy below €28/share.

U.S. Steel (X): The Metal That's Melting Tariff Costs

Automakers building locally in the U.S. need local steel. X's 50% Section 232 tariff on foreign steel creates a “Made in America” incentive. Its stock surged 30% in 2025 as automakers reshored.

Hold: X is a defensive play, but volatile. Wait for dips below $12/share.

The Bottom Line: Trade Tensions = Opportunity

The U.S.-Germany tariff war isn't a death knell—it's a catalyst for reshaping the auto industry. The winners are clear: BMW for execution, Daimler for EVs, and Continental for supply chain agility. The laggards? VW until 2027.

Investors should focus on companies that:
- Localize production in the U.S.,
- Dominate EVs (IRA subsidies are a lifeline), and
- Benefit from reshored supply chains.

Avoid companies betting on old-world exports. The next 12 months will separate the pretenders from the automakers who've mastered the new trade reality.

Final Play:
- Buy BMW (BMW.DE) at €80-€85/share
- Buy Continental AG (CON.DE) below €28
- Short Volkswagen (VOW3.DE) above €6.50

The road ahead is bumpy, but these stocks have the horsepower to outrun the tariffs. Buckle up and hit the gas!