The cloud of uncertainty is starting to fade around tariffs as automakers finally get a clearer picture of the impact. Tariffs are expected to cost Ford $1.5 billion and General Motors between $4-$5 billion this fiscal year. But the biggest impact could be on Toyota. One report indicates that the automaker might lose a million dollars every hour. Let that sink in.
Welcome to Critical Materials, your daily round-up of news and events shaping the world of electric cars and technology. Also on our dance card today: LG Energy Solution has completed the acquisition of General Motors’ Ultium Cells plant in Michigan. And there’s finally some light at the end of the tunnel for Polestar as it narrows losses and stands to benefit from the U.S.-China trade deal.
30%: Toyota Bleeds Cash As Tariff Negotiations Drag On
The world’s largest automaker by sales volume might have the financial might to weather the trade storm, but its heavy reliance on Japanese parts and imports means it’s likely watching its bank accounts melt amid the U.S.-Japan trade negotiations.
The U.S. has slapped 25% tariffs on auto imports, vehicle parts and steel and aluminum. The Trump administration has provided some trade relief, like reimbursements on vehicle part imports for U.S.-assembled models. But the impact on Toyota is colossal no matter how you look at it.
Automotive News reported on Monday that Toyota is staring at a $1.2 billion profit drop in just two months. Toyota has decided against immediate price hikes on its U.S. models to minimize consumer impact, but that means it’s likely eating up those losses.
Here’s more from that report:
Japan’s chief trade negotiator, Ryosei Akazawa, said on April 30 that one unnamed Japanese automaker is currently losing around $1 million per hour from the tariffs, citing a calculation made by an unidentified corporate executive. A Japanese government official on May 9 declined to provide more specifics. But that rate of loss is not too far off the mark from the $1.2 billion hit Toyota is projecting based on 730 hours per month. Representatives for Toyota also did not respond to a request for comment.
Toyota has a sprawling manufacturing footprint in the U.S. with 11 factories. It manufactures and assembles many of its models stateside. The Camry, Corolla, Highlander, Sienna, Tundra, and Sequoia are all made locally.
But the most popular versions of the RAV4 are assembled in Canada. The Tacoma is made in Mexico. All North American-made cars rely heavily on parts made in Japan. Lexus models are mostly imported from Japan. And over a dozen Toyota nameplates such as the Corolla hatchback, Prius, Land Cruiser, 4Runner and bZ4x are full Japanese imports.
Still, Toyota has promised to increase U.S. production. Its $13 billion battery plant in North Carolina is now operational. It is set to supply locally made batteries for Toyota hybrids, plug-in hybrids and EVs. But Toyota will still require a herculean effort to minimize the impact of tariffs on all of the aforementioned models. Its U.S. plants run at a high utilization rate and don’t have that much flexibility.
That’s why the outcome of the U.S.-Japan trade talks will be closely watched, as any deal could leave a lasting impact on Toyota and other Japanese carmakers. The bigger question in the interim is, how long can Toyota keep bleeding cash before customers see price hikes?
60%: LG Completes Acquisition Of GM EV Battery Plant
LG Energy Solution is likely the largest EV battery maker in North America at this point. It already operates eight battery production sites in the U.S. and now has another one under its umbrella. It completed the acquisition of General Motors’ stake in the Ultium Cells facility in Lansing, Michigan for $2 billion, Nikkei reported.
The news comes as General Motors backed down from this project in December, leaving LG scrambling to find new customers. Toyota agreed to transfer an existing order from another plant with a $1.5 billion order that would be met with battery production from this Lansing facility for its hybrids and EVs.
The Korean battery giant operates two plants with General Motors in Ohio and Tennessee. It also has other joint ventures in the U.S., including two plants in Georgia in collaboration with the Hyundai Motor Group and a JV factory in Ohio with Honda, among others.
America’s EV battery industry is far bigger than you think, with dozens of plants poised to drive America’s EV revolution. The bigger challenge for them is now to localize the supply chain and reduce reliance on Chinese raw materials.
90%: Polestar Is In Comeback Mode
Swedish automaker Polestar is showing signs of recovery as it nearly doubled its revenue in the first quarter, improved its gross margins by 14.5% and reduced its net losses by 31%. It’s still bleeding cash, but it's more of a dribble instead of an open vein.
It attributed these improvements to higher sales volumes and “favorable shift in the product mix.” Its global deliveries soared 76% in the first quarter to over 12,000 units. That’s thanks to the Polestar 2 electric crossover, Polestar 3 SUV and the Polestar 4 fastback.
The Polestar 3 is made in the U.S. and China, but the models sold stateside are assembled at Volvo Group’s Ridgeville, South Carolina plant. The Polestar 2 is only made in China, and is currently on a sales hiatus in the U.S. amid the tariff chaos.
The U.S. and China agreed to lower tariffs for 90 days on Monday. The U.S. reduced tariffs on Chinese imports from 145% to 30% and China reduced its duties on American imports from 125% to 10% temporarily.
This should help the Polestar 2 go back on sale, and maybe even shore up its U.S. inventory before steeper tariffs take effect after this 90-day period.
100%: Will You Pay More For A Toyota?
A stranger on a New York City subway recently told me how much she loved driving her new Toyota Corolla. She said she would not sell the car until the wheels came off, and felt lucky to have made the purchase before tariffs were even on her mind.
Toyotas come with bulletproof reliability and their resale values are the envy of Tesla owners. But now these much-loved models in the U.S. could get pricey.
Would you still buy a Toyota if the price goes up, and if so, what's your limit? Leave your thoughts in the comments.
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