For the auto business, tariffs have proved expensive. While tariffs on foreign-made parts and imported vehicles have been as high as 25% since the spring, higher taxes on imports such as steel and aluminum are driving up the cost of the commodities used to make cars. Despite recent agreements with the European Union and Japan, import duties from both nations remain 15% higher than in prior years.
However, consumers have not yet been charged for such expenses.
According to Kelley Blue Book data, June saw a 1.2% increase in new car transaction prices—the amount that buyers actually pay—year over year. In actuality, the price increase was less than the 10-year average annual increase, which means that automobile costs increased less than usual when tariffs went into effect.
“It’s been a little bit surprising but good for the consumer,” says Erin Keating, an executive analyst at Kelley Blue Book’s parent firm, Cox Automotive.
Dealer lots were crowded with cars that had previously been imported duty-free before tariffs went into effect this spring, which is one factor contributing to the problem.
Another reason, according to Keating, is that businesses took advantage of the rush to purchase automobiles before tariffs to draw in new customers to their brands. They could enhance sales by delaying price hikes.
Additionally, automakers had legitimate concerns that consumers would simply stop purchasing if costs increased. “Consumers are already overburdened,” says Ivan Drury, head of insights for Edmunds, a provider of automotive data.
New automobiles typically cost close to $50,000, and used cars typically cost close to $30,000. A growing percentage of automobile owners owe more than their vehicle is worth, and a record proportion of new car buyers are spending over $1,000 a month on their loans. High insurance premiums and interest rates, which are made worse by tariffs, are also hurting people. A new car eventually becomes just too costly.
“So really, price is almost the last thing [automakers] are touching” in response to tariffs, Drury explains.
Rather, large automakers have been bearing the loss up to this point.
The automakers have spent the last three months outlining their tariff costs in calls with investors: $1.1 billion for General Motors, $600 million for Hyundai, over $500 million for Kia, and $1.5 billion for Volkswagen. The parent company of Chrysler, Dodge, Jeep, and Ram, Stellantis, anticipates paying almost $1.7 billion in tariffs this year.
“For a majority of the automakers, they’re really taking the tariffs on the chin,” Keating claims. She points out that suppliers are also suffering as a result of the taxes.
It’s not a knockout punch to the chin. Despite their tariff expenditures, GM, Hyundai, Kia, and Volkswagen continue to turn a profit. (Stellantis’s problems predate the tariffs, but it is not.)
Investors, however, are putting pressure on the firms to stop bearing those costs indefinitely.
In response, several businesses are shifting more of their manufacturing to the US. Oliver Blume, CEO of Volkswagen Group, made a suggestion regarding the potential for producing Audis in the United States during a call with investors, stating, “We can think about localizing Audi products.” (The firm does not currently manufacture any Audis in the United States, but it does build Volkswagens in Chattanooga, Tennessee.) Additionally, GM is shifting the Chevy Blazer’s manufacturing from Mexico to Tennessee.
A second choice is to reduce expenses by discovering savings elsewhere in the supply chain or by asking suppliers to shoulder more of the load.
Additionally, management have stated that costs will eventually be transferred to customers.
“I think we can make progress on pricing,” Doug Ostermann, the chief financial officer of Stellantis, stated on a call with his firm. Additionally, when auto executives address investors, “progress on pricing” refers to price increases rather than price reductions.
Prices will naturally rise as the 2026 model year cars begin to appear on lots in the coming months, according to Drury of Edmunds and Keating of Cox Automotive.
Keating explains, “We’ve done some calculations,” “We anticipate that pricing would rise 4 to 8%, 8% really being the max, before truly a car is going to price itself out of its competitive set.”
Drury anticipates that costs will be passed on to customers in more subtly noticeable ways in addition to sticker prices increasing. $3,500 cash back might become $1,500 cash back, and a 1.9% financing agreement may become a 3.9% rate.
His words, “You will see something change,”
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