On June 6, 2022, an autoworker at the Nissan Smyrna Vehicle Assembly Plant in Tennessee. The factory employs more than 7,000 people and produces a variety of vehicles, including leaf and rogue crossovers.
Michael Wayland/CNBC
Detroit – Despite withdrawals on other country-based collections this week, analysts are hoping to have a major global impact on the automotive industry because of policy, as President Donald Trump’s 25% tariffs on imported vehicles remain in effect.
A research report from Wall Street and Auto Analysts shows that millions of vehicles are expected to sell more vehicles, higher new and used car prices, and cost growth of more than $100 billion.
Felix Stellmuszek, the global leader in automotive and mobility at Boston Consulting Group, told CNBC. “This could be the most important year for the automotive industry in history, as it forces not only immediate cost pressures but fundamental changes in the way and where the industry is built.”
BCG expects tariffs to add between $110 billion and $160 billion on an annual occupancy basis to the industry.
The Automotive Research Center, a Michigan-based non-profit think tank, expects costs alone to increase by $107.7 billion. This includes $41.9 billion for Detroit automakers General Motors, Ford Motor Chrysler’s parents Stellantis.
Both analysis considers the 25% tariffs on imported vehicles that Trump implemented on April 3rd and the same amount of taxation on auto parts that are expected to begin by May 3rd.
Car inventory
Analysts say car manufacturers and suppliers may be able to cover some of the increased costs, but they are expected to pass it on to US consumers.
“We believe that the proposed tariffs will increase the costs of at least low to medium US vehicles at an average of at least a thousand dollar levels in a single digit, and we believe it will be difficult for the automotive industry to take over this entirely, particularly by softening consumer demand more generally.
Goldman Sachs expects new vehicle net prices in the US to rise by around $2,000 to $4,000 over the next six to 12 months’ time frame to better reflect tariff costs.
Automakers respond to customs duties in a variety of ways. While mostly domestic manufacturers such as Ford and Stellantis have announced temporary transactions on employee pricing, other manufacturers such as British automaker Jaguar Land Rover have stopped shipping in the US. Hyundai Motor also said it will not raise prices for at least two months to alleviate consumer concerns.
A University of Michigan survey found that consumer sentiment was even worse than expected in April as expected levels of inflation reached its highest since 1981.
Sam Abuelsamid, Vice President of Insights Automatic Advisory Farm Telemetryand expects many automakers to supply non-tariff impact vehicles for at least about two months.
Telemetry is expected to see more than 2 million fewer vehicles sold annually in the US and Canada as the costs of production, parts and other factors increase, which will have a ripple effect on the wider economy.
“If sales are cut in millions, there will be a wide economic impact,” Abuel el amide said. “It’s caused by the overall price, not just the vehicle. This is what we’re going to “limit the payouts” for people.”
The affordability of new and used cars has been a problem for several years. On average, Cox Automotive reports new vehicles It costs almost $50,000. That figure does not include the cost of financing such vehicles. The vehicle has risen significantly in recent years to combat inflation.
According to Cox, car loan fees remain for nearly decades, more than 9.64% for new vehicles and almost 15% for used or used cars.
“We expect tariffs to pass, supply tighten, supply tighten, supply tighten, supply tighten and price rise accelerated,” Cox Automotive chief economist Jonathan Smoke said during the virtual event Monday. “In the long term, we expect production and sales to fall, newly used prices will rise and some models will be eliminated.”
The expected price increases will vary by vehicle, but Cox estimates a $6,000 increase on the cost of imported vehicles due to a 25% tariff on non-US assembled vehicles and a $3,600 increase on US assembled vehicles due to a 25% tariff on auto parts. These add to an increase of $300-500 as a result of previously announced tariffs on steel and aluminum.
