Tariffs Drive Automakers to Adapt Quickly as Consumer Costs Climb

Likely no business vertical will emerge unscathed from the latest round of tariffs imposed by the President Donald Trump administration, but the automotive industry stands to be hit the hardest.

Manufacturers and dealerships are navigating a complex landscape of price adjustments, production halts and strategic inventory management. The tariffs, which took effect Thursday (April 3), impose a 25% duty on imported vehicles, affecting nearly half of the cars sold in the United States market, CNBC reported. The move has set off a chain reaction across the industry, with implications for domestic and international players.

On the supply side, automakers are employing diverse strategies to mitigate the impact of these tariffs. BMW, for instance, announced plans to absorb tariff costs for vehicles manufactured in Mexico until May 1, affecting models like the 3 Series and 2 Series, Car and Driver reported Thursday.

Meanwhile, Stellantis, parent company of Chrysler and Dodge, temporarily suspended production of certain models in Canada, including the electric Dodge Charger Daytona, per the report. Ferrari opted to increase prices on select high-performance models by 10% to offset the tariff costs.

Ford introduced an employee discount initiative, “From America, for America,” aimed at reducing consumer costs for eligible vehicles, the report said. Genesis and Hyundai indicated no immediate plans to raise prices, although they may eventually pass costs to consumers.

Dealerships are bracing for impact, with some expressing cautious optimism while others foresee challenges. The tariffs have led to an uptick in customer visits as buyers rush to buy vehicles before potential price hikes. Dealers like Kenny Covert from Texas are less optimistic, noting a drop in leads and comparing the situation to the 2008 mortgage crisis, according to a separate Car and Driver report Thursday.

“Ultimately, when our price goes up, unfortunately consumers’ prices go up,” said Covert, managing partner for Covert Auto Group, per the report. “But also, I think Trump is a businessman. I don’t think he’ll let the Big Three sales go out of whack.”

Daniel Roeska, a Bernstein analyst, said in the CNBC report, “A 25% [tariff] on automotive imports lasting beyond four to six weeks would likely have a chilling effect on the entire sector as [automakers] need to grapple with significant impact to the bottom line.”

The sentiment reflected the widespread concern among analysts about the long-term viability of the tariffs.

“Many vehicle parts are sourced globally, which would increase repair costs for car owners, and reconditioning costs for dealers,” said Jessica Caldwell, an analyst at Edmunds, according to a March 27 Reuters report. “Insurance premiums will also likely increase as any accidents involving new parts will see increased costs as well.”

Consumer Behavior and Digital Tools

The PYMNTS Intelligence report “Why 60% of Gen Z’s Live Paycheck to Paycheck” found that while Generation Z consumers prioritize buying cars, many are not yet financially equipped to do so. The gap between aspiration and affordability could be exacerbated by rising car prices due to tariffs. Digital tools, such as online pricing platforms and inventory management systems, may help dealerships and manufacturers navigate these challenges by optimizing inventory levels and providing consumers with more transparent pricing information.

In the digital economy, platforms that facilitate price comparison and vehicle sourcing could become increasingly valuable as consumers seek to make informed purchasing decisions amid price volatility. Additionally, digital financing tools could help bridge the affordability gap by offering more flexible payment options and clearer financial planning resources.

As the automotive sector continues to adapt to the tariffs, the interplay between traditional industry strategies and digital innovations will be crucial in mitigating the impact on businesses and consumers. Whether through price adjustments, production shifts or using digital solutions, the industry’s response will shape the future of car sales in the U.S. market.