Auto Industry Wrestles With Challenge of Tariffs and Cautious Consumers

The auto industry is reportedly being rocked by tariffs, the expense of electrification and cautious consumers.

The troubles of some companies in this sector may signal difficulties to come in the broader economy, the Wall Street Journal (WSJ) reported Thursday (Sept. 25). The report pointed to used car seller CarMax saying that its sales and profit plunged during the latest quarter; Ford offering lower interest rates on its F-150 pickup trucks; Honda scrapping an electric Acura SUV; other automakers offering steep discounts on electric vehicles; subprime auto lender and car dealer Tricolor filing for bankruptcy liquidation; and auto parts supplier First Brands preparing to file for bankruptcy protection. CarMax CEO Bill Nash said during a Thursday earnings call that consumers have been “distressed” and that “there’s some angst,” according to the report.

The company added that demand in the current quarter was reduced by consumers rushing to buy cars earlier this year ahead of possible tariffs, the report said.

While new vehicle sales remain robust, they have been propped up by consumers buying electric vehicles before a tax credit expires at the end of September, per the report. The report added that research firm J.D. Power said Thursday that it expects the bulk of the market — gasoline and hybrid vehicles — to see a 2.5% decline in sales this month.

In a Thursday press release announcing this forecast, Thomas King, president of the data and analytics division at J.D. Power, said: “In totality, average vehicle prices continue to rise, discounts remain low and monthly finance payments are at record highs—all of which affects the overall sales pace.” It was reported Sept. 10 that when Tricolor filed to liquidate in bankruptcy, banks were set to suffer hundreds of millions of dollars in combined losses from loans tied to the company.

In August, it was reported that European car exporters were wrestling with uncertainty surrounding American tariffs and that car makers had scrambled to ship vehicles to the U.S. before a 27.5% tariff kicked in and then held more back as the second quarter began as they waited for a new 15% rate to be implemented.