The main automobile manufacturers can deal with the tariffs of President Donald Trump about the imports of the United States cars in several ways, but all of them lead to a price increase, fewer model options or limits in the characteristics for consumers, industry experts said.
Trump on Wednesday announced 25% tariffs on cars and spare parts, sending down the actions of world car manufacturers and increasing fears of job loss in large car exporting countries.
He says that the encumbrances will ultimately boost production in the United States, but analysts say that the immediate effect will be in the options of car manufacturers that will hit consumer wallets.
“Most cars manufacturers cannot take charge of 25%, they simply cannot,” said Andy Palmer, former CEO of Aston Martin.
“That means that car manufacturers will have the cost of tariffs as much as they can,” even eliminating characteristics to reduce their costs, although also raising prices.
Automobile manufacturers can distribute that cost between the models produced in the US and the imported ones, cut the characteristics and in some cases, stop selling affordable models aimed at first -time car buyers, since many of them are imported and less attractive if they have a higher price.
Tariffs are jeopardized in industry
The changes could expel more Americans from the market. S&P Global Mobility estimated Thursday that tariffs will cause annual US vehicles to fall to a range of between 14.5 million and 15 million in the coming years from 16 million in 2024.
Cox Automotive estimates that tariffs will add $ 3,000 to the cost of a vehicle made in the United States and $ 6,000 to vehicles made in Canada or Mexico without exemptions. While luxury vendors such as Bentley or Ferrari say they will impact costs, typical margins of large car manufacturers, from 6% to 8%, leave little room for maneuver.
The affordable models that will probably be most affected are the Honda CR-V, Chevy Trax, Subaru Forester, Chevy Equinox and Honda HR-V, said Erin Keating, COX executive analyst. “Automobile manufacturers know that they have certain vehicles in their wallet that can tolerate lower benefit margins,” Keating said. “Some vehicles can simply be too expensive and most of them are affordable models manufactured outside the US.”
After 10% of the car buying population was out of the market during the Coronavirus pandemic, affordability remains one of the main concerns of consumers, Keating said.
“Were tariffs affect another 10% of people who would be excluded from the market?” “Surely”.
The US car dealers currently have a lot of inventory, for about 90 days, but prices could start up after that date. In recent weeks, Eric Mann, sales director of the Szott M-59 Jeep concessionaire at White Lake, Michigan, 45 minutes northwest of Detroit, noticed that more customers bought for fear at higher prices.
Loretta Acosta, 55 and resident in Macomb, Michigan, was watching a Jeep Grand Cherokee at the Szott dealership on Thursday and said that “it could be disgusting” if the prices of cars go up because of the tariffs: “But I think that sometimes things are disgusting and you have to endure for the good of the country,” Acosta said.
With Reuters information.
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