RBC Capital’s analyst Tom Narayan lowered on Friday the firm’s price target on Tesla, Rivian and General Motors. The firm estimates that the tariffs will lead carmakers to pass the added costs on to consumers, resulting in higher vehicle prices.
While RBC is not expecting companies to comment on the tariff’s impact at their upcoming first-quarter earnings call, it forecasts that annual sales guidance will be lowered, highlighting already-low market expectations for this year.
Given the 25% tariff applied to all imported vehicles and auto parts, Narayan believes automakers are less affected than suppliers.
However, the analyst noted that investors who are making a no tariff call could see significant upside by investing across the entire sector. Donald Trump announced a 90 day pause on the tariffs as it is negotiating the tax with several countries.
Tesla
Regarding Tesla, RBC Capital slightly reduced their price target by $6 to $314, while reaffirming the Outperform rating. Narayan highlighted that the EV maker’s range in the sector and its domestic production allow the company to be less impacted by import rates.
“Given Cars is only 11% of our valuation, tariff impacts would not be as magnified as they would be for other carmakers,” he stated. “Robotaxi and FSD [Full Self Driving software] account for 77% of our valuation for Tesla and we don’t see tariffs impacting those businesses.”
However, the analyst does not exclude the possibility of effects on consumers. “Tesla’s domestic sales are produced in the U.S., so there would be no direct manufacturing tariff impact. That said, non-U.S. content is substantial“, Narayan added.
RBC Capital expects “the company to price tariff impacts to consumers” and, as a result, “volumes would come down further in a permanent tariff scenario.”
GM
The firm also cut General Motors‘ price target by 18% to $55.00, although it maintained its Outperform rating. RBC said the rates and the lowered overall volumes led the firm to envision “a scenario where GM absorbs the tariff in full”, in which “cuts would be severe.”
Highlighting the decline of 2 million units in annual sales in the U.S., the analyst estimates the Detroit automaker’s earnings to be cut by 21% followed by a stock price decline.
“This could lead to a drop in GM’s stock price, with shares potentially falling to $28, which represents a 40% decline from current levels,” the analyst stated, but “in reality, the company would pass the tariff on to consumers and instead see softer volumes.”
“In terms of liquidity, we forecast GM having a $14 billion Net Cash position by the end of 2025. During the pandemic in 2020, the company had a Net Cash position closer to $4.4 billion,” the firm concluded.
Rivian
RBC trimmed Rivian‘s price target by 16.7% to $10, but the stock was kept on the Sector Perform rating. Based on Thursday’s closing price of $11.46, the firm’s new price target implies a downside of 12.7% on the Rivian shares.
On the research note, RBC’s analyst highlighted that Visible Alpha consensus estimates Rivian could burn over $9 billion in free cash flow between 2024 and 2028.
“According to the company, Rivian ended 2024 with $7.7 billion in cash and STI [short-term investments] and including its credit facility, gross liquidity would be $9.1 billion.”
“On the debt side, the company faces maturities of $1.2 billion in 2026, $1.5 billion in 2029, and $1.725 billion in 2030. We expect some of these could be refinanced, however,” the analyst added.
The U.S. brand expects to receive more than $4 billion in cash and loans from Volkswagen’s deal from 2024 to 2026, with $1 billion already having been paid last June.
Narayan stated on the research note that Rivian has secured a $6.6 billion loan from the U.S. Department of Energy, which is designated for capital expenditures “and will be paid out as reimbursements for cash spending.”
Rivian’s affordable midsize platform is set to launch next year. Prices will start at about $45,000 — significantly lower than the brand’s R1S and R1T models, which are priced above $70,000.
RBC is concerned about the long-term impact of removing the IRA [Inflation Reduction Act] credit on upcoming models. “We also worry about impacts of removing the IRA on R2/R3, as those products will cater to a more price sensitive customer,” Narayan noted.
The analyst concluded that “ultimately, a lot rests on the company’s ability to improve its underlying Gross Profit performance, excluding regulatory credits.”
UBS also cut Rivian‘s price target on Thursday by 14.3%, to $12, keeping their Neutral rating on the shares. The firm stated that new trade policies will lead to increased consumer prices, negatively impact demand and disrupt production.
Earlier this week, Mizuho analyst Vijay Rakesh also trimmed the price target on the EV maker by $1 to $10.00.
U.S. sales dropped to 11,070 vehicles in the first three months of the year, by 26.6% year over year. In the same period, the Irvine-based manufacturer produced 14,611 vehicles and delivered above 8,100 units, reaching its guidances for the quarter.
Rivian said it will report its first quarter earnings results on May 6th. At the time of writing, Rivian is trading 2.3% lower at $11.20.