Developments and Impact newly imposed tariffs could have on the automobile industry
Cox Automotive Forecasts a large impact on prices and a more moderate impact on sales
- Tariffs would add +$3,000 even to the cost of a car built in the United States since automakers depend on many foreign components.
- Tariffs would add $6,000 on average to the prices of cars made in Mexico or Canada
- U.S. factories would produce 20,000 fewer cars per week, or about 30 percent less than usual
- Cox Automotive 2025 Sales range is 15.6 - 16.3M, with the baseline being 15.6 (include some tariffs for some countries), meaning a -1.88% sales reduction at baseline, and 2.5% upper range.
Assessment: Since the average transaction price in the US is ~$48,000. It means there would be a minimum 6.25% increase in auto prices produced in the US, and a 12.5% increase for the ones produced outside. (meaning about half the tariffs will be passed to consumers)
@Aron I think it would also be prudent to include in the scenarios reduced sales due to these factors: 1- fall in production in US-produced models as Cox is forecasting because of supply chain disruptions, 2- lower-income consumers are not able to absorb higher prices without any decrease in demand (is not 2021/2022 boom economy anymore, much less with current uncertainty that impact big ticket items more), and 3- substitution effects from imported autos to US produced autos because the increase in prices will be lower.
Cox baseline is a -1.88% reduction in the latest outlook, but I think VW could be a bit more than this, at least in the economic segments. Cox also said this includes some tariffs for some countries, so it could be more pronounced than this with a full 25% on everything, probably worth exploring in worse scenarios.
https://www.nytimes.com/live/2025/03/26/business/trump-tariffs-auto-cars
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What is the likelihood that foreign automakers will be substituted? My first guess is that it’s low, given the major US-born automakers (Ford, GM and Stellantis) are also facing high costs associated with the tariffs.
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My best guess is to say is low, but not negligible, because the increased for US produced cars is still expected to be half of those imported completely. It will really depends on how much each automaker wants to increase the price, or keeping more or less flat to gain market share.
Details we will only know when they start to come out with additional details.
Btw, I just saw this:
BMW new price increases will go live effective May 1, 2025. BMW 4% price increase seems very modest, and it seems will be willing to absorb most of the cost at least for now.
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