WEB DESK: With the United States set to impose hefty tariffs on imported vehicles, car manufacturers are facing tough decisions: raise prices, shrink profit margins, or even adjust production by opening or closing factories.
Starting April 3, the Trump administration will impose a 25-percent tariff on cars and car parts not produced in the U.S. While this directly affects foreign automakers, even U.S. manufacturers will be impacted, as they rely on imported parts and produce vehicles in neighboring Canada and Mexico for the U.S. market.
The Bank of America estimates that these tariffs will apply to 7.3 million vehicles—8 percent of global sales exposing carmakers to increased costs and potential disruptions.
In the face of these looming tariffs, one short-term strategy is to ship as many vehicles to the U.S. as possible before the new tariffs take effect. “Shipments have expanded quite a bit to absorb the first shock,” said Fitch Ratings Director Cigdem Cerit. “Everyone has built a little buffer,” she added.
South Korea’s Hyundai, according to Cox Automotive, was among the automakers that built up the most inventory. Meanwhile, Stellantis reduced its large stockpiles that had weighed on performance in previous quarters.
However, these stockpiles are expected to last only a few weeks, especially if consumers rush to dealerships to secure any remaining deals. “After an initial, brief surge in buying, we expect vehicle sales to fall, prices for new and used cars to rise, and some models to be discontinued if the tariffs remain in place,” said Jonathan Smoke, chief economist at Cox Automotive
