Title: Navigating Uncertainties: Carmakers and Consumers React to Trump's Tariffs and EV Policies
With President Donald Trump signing executive orders this week, import tariffs are up for debate. These tariffs, if implemented, could add thousands to the cost of some vehicles, with a 25% import tariff on goods from Canada and Mexico set to take effect on Feb. 1. The administration is also exploring duties on imports from China and the European Union.
Kevin Roberts, director of economic and market intelligence at online vehicle marketplace CarGurus.com, highlights the tight timeline, stating that consumers could witness divergent vehicle prices based on when they arrived on lots before or after Feb. 1. This price disparity could significantly impact purchasing decisions, particularly for high-priced models like full-size pickup trucks.
Interestingly, the average list price of U.S.-made vehicles already surpasses most imported ones, standing at $53,500 according to a CarGurus study. As a result, tariffs may primarily impact import costs, potentially affecting buying decisions but not causing a drastic price increase.
However, it's important to consider the additional costs to consumers imposed by tariffs on imported parts and components from Mexico, which manufacture 16% of all U.S. vehicles. Similarly, Canada accounts for 7% of vehicle production in the U.S., resulting in even higher parts costs.
Not all automakers share the same risk of having tariffs applied to their products. Jaguar-Land Rover, Mitsubishi, and Volvo have the highest inventories of vehicles built outside North America, while Stellantis, Honda, and Ford have the least.
With uncertainties surrounding import prices, President Trump's administration may cause automakers to reconsider their electric vehicle (EV) production and sales strategies. For instance, he is reportedly contemplating ending the $7,500 federal tax credit offered for purchasing an EV.
In response, retail partners like TrueCar.com propose alternative solutions, such as targeting EV incentives through their affinity networks and offering dealer-level discounts to boost sales. The switch to EVs has also stimulated demand, as seen in the 10.5% retail market share in December quarter in 2024, although sales still lag behind industry targets.
President Trump's potential regulatory changes towards EVs, including ending tax incentives and halting federal spending on charging infrastructure, may have long-term effects on the EV market. For instance, there is concern regarding the impact on the expansion of the charging infrastructure, which is essential for EV adoption.
In conclusion, President Trump's tariff policies pose various challenges for automakers, dealers, and consumers. While there may not be a significant price jump for imported vehicles due to the 25% tariff, imported parts and components will likely contribute to higher consumer costs. Automakers' EV production strategies, current sales events, and future EV adoption may all be impacted by regulatory changes.
Despite President Trump's consideration of ending the $7,500 federal tax credit for purchasing electric vehicles (EVs), some automakers like Jaguar-Land Rover, Mitsubishi, and Volvo have a high reliance on EV production outside North America. Trump's trucks, known for their popularity, could be affected if import tariffs increase their costs. For instance, if a 25% tariff is imposed on imported trucks from Canada and Mexico, their prices might escalate significantly, impacting consumers' purchasing decisions.