According to a Moody’s report, the 25% tariff on imports of vehicles and auto parts proposed by the Trump administration would be modestly credit negative for US aftermarket auto part suppliers, Moody’s Investors Service says in a new report. However, the sector would be somewhat shielded by its reliance on vehicles already in operation.
“The fallout from tariffs for aftermarket suppliers would likely be relatively muted and felt more over the long term, particularly given that sector mostly serves owners of existing cars rather than buyers of new cars,” says Moody’s analyst Bodeck. “Moreover, higher prices on imported cars may prompt some consumers to hold on to their existing vehicles, potentially offsetting the negative impact of tariffs by increasing demand for replacement parts.”
Tariffs on auto parts imports would also have little direct impact on US sales of aftermarket parts, adds Bodeck, because most of these products are manufactured domestically.
The effect on individual suppliers will depend largely on how much they rely on sales to original equipment (OE) automakers, says Moody’s. Other factors include suppliers’ relative exposure to the pickup truck market, the proportion of revenue they derive from sales to automakers, the strength of their own online retail presence, and how much of their production is based in Mexico.
“Another consideration that will affect the relative impact from prospective tariffs is that rated aftermarket parts suppliers service consumers at different stages of a vehicle’s life,” notes Bodeck. “As a result, the near-term implications of import tariffs will be determined in part by the relevant stage of their respective service.”
Moody’s says that Truck Hero and Rough Country are best positioned given their focus on accessorizing pickup trucks, which are mostly manufactured domestically and face solid growth prospects. BBB Industries is likely most vulnerable due to uncertainty surrounding whether its remanufactured products would be categorized as imports, and the fact that the company generates about half of its revenue from the largest auto retailers.