- President Donald Trump imposed a 25% tax on US auto imports three weeks ago
- Inchcape fears tariffs could weigh on supply of parts and customer demand
Inchcape shares tumbled on Thursday morning after the car distributor warned that trade tariffs could hamper vehicle supply and strangle customer demand.
To try and spur domestic motor manufacturing, President Donald Trump imposed a 25 per cent tax on US auto imports three weeks ago – though he has since signalled potential exemptions.
He has also slapped a 10 per cent baseline tariff on all goods entering the US and a 25 per cent duty on foreign-made steel and aluminium, two key components in carmaking.
Inchape told shareholders on Thursday that while tariffs had not yet affected trade, their longer-term impact is ‘currently unclear’.
Tariff measures have rocked the global motor industry, which has warned they will lead to redundancies, increased car prices and supply chain disruptions.
However, reports suggest Trump is looking to exempt tariffs on car parts from China following intensive lobbying efforts in recent weeks.
The White House later confirmed that it was considering exemptions for automakers.
Drop: Inchcape shares tumbled on Thursday morning after the vehicle distributor warned that tariffs could affect market demand and supply from carmakers
Duncan Tait, chief executive of Inchcape, said the group anticipates ‘potential impacts on supply from our OEMs (original equipment manufacturers), the competitive environment and market demand’.
He added: ‘We are taking proactive steps to support our key stakeholders, including taking a conservative approach to managing inventory levels, ensuring we remain disciplined on costs, focusing on cash generation and maintaining our strong balance sheet.’
Inchcape also revealed its turnover declined by 5 per cent at constant currency rates to £2.1billion in the quarter ending March.
Though the business achieved growth in the Americas, it said sales across Europe and Africa fell due to an unwinding order bank, while trade in the Asia-Pacific region suffered from headwinds in ‘several key markets’.
The group still gained seven distribution contracts, including deals to sell BYD’s electric vehicles in Lithuania and Latvia and Smart cars in Ecuador, Colombia, and Uruguay.
Inchcape also said it had purchased £54million from its £250million share buyback scheme so far and reiterated its annual guidance, which excludes possible effects from tariffs.
Analysts at broker Berenberg said: ‘Inchcape has a strong track record in managing tricky situations, and we are encouraged that the company is mitigating risks by being proactive whilst also working with partners to capitalise on any opportunities.’
The London-based firm’s shares slumped 9 per cent to 629.5p before recovering to be 5.7 per cent down at 652.5p just before 11am, although they were still the FTSE 250 Index’s biggest faller.
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