- President Trump’s 25% tariffs on imported vehicles and auto parts are driving up prices for new and used cars.
- Cox Automotive predicts a $6,000 increase for imported vehicles and $3,600 for U.S.-assembled cars.
- Used car prices are expected to rise by 2.1%–2.8% by year-end due to market adjustments.
- Automakers are responding with varied strategies, including price freezes and reduced production.
- The automotive market is described as a ‘roller coaster ride’ amid economic and regulatory uncertainty.
Auto Sales Face Volatility as Tariffs Drive Price Hikes
The U.S. automotive market is bracing for significant changes as President Donald Trump’s 25% tariffs on imported vehicles and auto parts take effect. Industry experts warn that these tariffs will lead to notable price increases for both new and used vehicles, creating a ripple effect across the automotive sector.
Impact of Tariffs on New Vehicle Prices
According to Cox Automotive, a leading automotive data and advisory firm, the tariffs will add approximately $6,000 to the cost of imported vehicles and $3,600 to U.S.-assembled cars. These increases are compounded by earlier tariffs on steel and aluminum, which added $300 to $500 to vehicle costs. Automakers are expected to pass these costs on to consumers, leading to higher prices across the board.
Jonathan Smoke, Chief Economist at Cox Automotive, explained during a recent virtual event, “We expect to see declining discounting and then accelerated price increases as the tariffs are passed through and supply tightens.” He also noted that some vehicle models might be eliminated as manufacturers adjust to the new economic landscape.
Used Vehicle Market Adjustments
While the tariffs directly target new vehicles and parts, their impact extends to the used car market. Cox Automotive predicts that wholesale prices for used vehicles will rise by 2.1% to 2.8% by the end of the year, up from an earlier estimate of 1.4%. The average listing price for a used vehicle was approximately $25,000 as of mid-March, with further increases expected.
Jeremy Robb, Senior Director of Economic and Industry Insights at Cox Automotive, highlighted the volatility in the used car market, stating, “Expect to see some volatility in pricing over the year.” Retail prices for used cars, which typically follow wholesale trends, are also anticipated to climb.
Automakers’ Responses to Tariffs
Automakers are employing various strategies to navigate the new tariffs. Ford Motor and Stellantis, for example, have introduced temporary employee pricing deals to attract buyers. In contrast, Jaguar Land Rover has ceased U.S. shipments, and Hyundai Motor has pledged not to raise prices for at least two months to alleviate consumer concerns.
Despite these efforts, production cuts are likely as manufacturers grapple with rising costs and shifting consumer demand. “Over the longer term, we expect production sales to fall,” Smoke noted, adding that some automakers may reduce their model offerings.
Economic and Regulatory Uncertainty
The automotive market is described as a “roller coaster ride” due to the interplay of economic uncertainty and regulatory changes. The tariffs are expected to dampen demand for vehicles, which could mitigate some of the price increases in the used car market. However, the overall outlook remains uncertain, with analysts predicting fluctuations in sales and pricing throughout the year.
Ryan Rohrman, CEO of Rohrman Automotive Group, compared the current market disruptions to those experienced during the COVID-19 pandemic. “We’re seeing our wholesale car count really go up, but the problem is we’re not able to get as many cars on the used car side as we’re retailing,” he said. This imbalance is driving up auction prices, further complicating the market.
Looking ahead, the automotive industry faces a challenging road. The combination of higher prices, reduced production, and shifting consumer preferences could reshape the market. Analysts emphasize the importance of monitoring inventory levels, pricing trends, and consumer behavior as the industry adapts to the new tariffs. While the immediate impact of the tariffs is clear, their long-term effects will depend on how automakers, dealers, and consumers respond to the evolving landscape. As Smoke concluded, “It’s going to reduce the demand for vehicles, and it’s that demand component that I think really keeps the lid on from what we’re likely to see with used vehicle price appreciation.”
Sources: Cox Automotive, Detroit News