The Pending (Potential) Impact from Tariffs on Automotive Sales and Brands

Mar 31, 2025 | Perspectives

Of course, the impact will be different for each brand. Some automakers are more exposed than others, depending on the percentage of vehicles they import. For the short term, some OEMs with a bigger inventory supply may be better positioned.

Much of it depends on how different countries — which are still processing the news — will react.

Reactions from Korea, Europe, Japan, Canada, and Mexico are still developing, with Europe still expressing hope for a compromise while Canadian officials are threatening to inflict as much pain as possible on the American people with retaliatory tariffs.

U.S. PLANT CAPACITY A FACTOR

Although many have praised the tariffs — including UAW President Shawn Fain, who said it’s “time to end the free trade disaster” U.S. production will not increase much in the next couple of years. It takes three to four years to bring a new automotive plant online, and automakers have little wiggle room at existing plants.

Ward’s Intelligence places current U.S. manufacturing plant capacity at just over 65% (80% utilization is considered to be near full capacity), but much of the utilization is due to a lack of electric vehicle demand. Overall, there is not enough plant capacity in the U.S. for automakers such as Toyota, Honda, General Motors, Ford, or Stellantis to move high-volume production from Canada or Mexico.

Building new plants takes time. The new $7.6 billion plant that Hyundai officially opened in Georgia this week has been in development since January 2022.

Even configuring existing plants takes time and investment. Stellantis announced in January it is investing $1.2 billion to reopen its shuttered Belvidere plant in 2027 with plans to build a mid-range pickup truck there. Whether Stellantis moves production of a vehicle it currently manufactures outside the U.S. to Belvidere remains to be seen.

Nevertheless, automakers are clearly evaluating current manufacturing plans and product initiatives and will likely start announcing more investments in U.S. plants.

IMPACT

Although the tariff saga will continue to be an evolving story, below are several areas in which the auto industry will be impacted.

  1. Analysts predict the impact will mirror (likely exceed) what the industry saw with the chip shortage.
  2. Both S&P Global Mobility and Cox Automotive predict North American production will decline in the first couple of weeks by as many as 20,000 vehicles a day — about 30% of total production.
  3. Cox Automotive adjusted its 2025 sales forecast from 16.3 million units to 15.6 million units.
  4. Depending on the brand, vehicle pricing could increase between $4,000 to $10,000 or more. (Some Jaguar Land Rover dealers are saying they expect prices to jump $10,000+ for their vehicles). Suppliers have already informed the OEMs that they cannot take on any more price reductions.
  5. Incentives will disappear as inventory thins.
  6. Lower-priced vehicles will be hit hard, as 10 of the 20 current models listed below $30,000 are imported. Models built in Mexico and Canada could see prices jump by as much as $5,855, according to Cox Automotive. Automakers may have to make tough decisions on which nameplates to keep or scuttle.
  7. Potential losers on the less expensive end of the spectrum may include the following:
    • Chevrolet Trax (built in South Korea)
    • Jeep Compass (built in Mexico)
    • Dodge Hornet (built in Italy)
    • Ford Maverick (built in Mexico)
    • Ford Bronco Sport (built in Mexico)
    • Hyundai Elantra and Venue (built in South Korea)
    • Kia Soul (built in South Korea)
    • Kia K4 (built in Mexico)
    • Nissan Kick, Versa, and Sentra (built in Mexico)
    • Subaru Forester (built in Japan)
  8. German brands are likely to be hit hard.
    • Volkswagen imports more than 70% of its vehicles from Mexico and Europe. Meanwhile, Porsche or Audi do not build any vehicles in the U.S.
    • About 36.5% of the vehicles Mercedes-Benz sells in the U.S. are built in the U.S., with another 3.5% manufactured in Mexico and 60.1% built in Europe.
    • BMW produces its 2-Series Coupe, its 3-Series, and M2 models in Mexico.
    • Mercedes imports nearly 65% of the vehicles it sells in the U.S.
  9. The impact on Japanese brands will be mixed, but one analyst predicts a $29 billion hit combined on profitability for Japanese automakers.
    • Honda is one of the least exposed automakers, as almost 60% of its U.S. market is built in the U.S. — third behind Ford and Stellantis. Executives have said the automaker will adjust its manufacturing plans and likely will move more production to the U.S.
    • Toyota imports nearly 55% of its vehicles into the U.S. Most of its pain will be felt with the Tacoma, which is built in two plants in Mexico and accounts for 10% of its overall sales in the U.S. The Rav4 (at more than 475,000 sold, it was the best-selling non-truck vehicle in the U.S. in 2024) is mostly built in Canada, but an estimated 70% of its components are sourced from the U.S.
    • Nissan is in a tough spot as it is beginning to restructure its business to get costs in line while trying to find an investment partner. Several analysts believe the automaker is highly exposed, with 55% of its vehicles imported into the U.S.
    • Of the top 12 manufacturers, Mazda is last in U.S. manufacturing, building only 20% of its vehicles here.
    • Subaru imports 54% of its U.S. vehicles, most of which are the Forester, which is built in Japan. The Ascent, Crosstrek, Outback, Legacy, and Impreza are built in the Indiana plant.
  10. Hyundai and Kia combined import 62% of their vehicles into the U.S. from both Mexico and South Korea. Hyundai just opened a $7.6 billion EV plant in Georgia this week. Although exposed for the next couple of years, the automaker does appear intent on increasing its U.S. manufacturing footprint.
  11. The Big Three, General Motors, Ford, and Stellantis, will be impacted at various levels.
    • Ford, building nearly 80% of its vehicles in the U.S., is the least exposed of all automakers. But it does source engines from a Canadian plant for its F-150 trucks.
    • General Motors will feel the impact, having imported about 750,000 vehicles from Canada and Mexico last year. The Silverado Heavy Duty truck is produced in Canada, while several models — Cadillac Optiq, Chevrolet Blazer, Equinox (gas & EV), Chevrolet Equinox, GMC Terrain, Chevrolet Silverado/Cheyenne crew cab, and the GMC Sierra crew cab — are built in its three Mexican plants.
    • Stellantis is second to Ford in domestic production, building more than 68% of its vehicles here.
  12. At some level, the used vehicle market will catch fire again. Inventory is already limited, and that dynamic will increase as available off-lease inventory hits its trough later this year and into 2026, resulting from the steep decline in leasing in the early part of this decade. Add the tariff component of significantly higher prices on new vehicles, and dealership profits might explode again as used vehicles become more attractive to the consumer.
  13. The EV tax rebate is still in play — probably not for much longer, but it is still available for now.

CONCLUSION

Uncertainty remains the driving dynamic here. Much of what we think or know today may be different next week. Impacted countries and automakers are lobbying the White House hard to gain both clarity and more favorable terms.

For dealers, thinking outside the box, getting creative with the marketing, and communicating with customers while not getting distracted by the noise will be critical in the next few days and several weeks. The key will be finding ways to make sure the consumer doesn’t avoid the dealership because of the tariff noise.

(From The Banks Report) March 28, 2025 — After months of speculation and delays, President Trump’s automotive tariffs of 25% on all imported vehicles are set to begin at 12:01 a.m. on Thursday, April 3.

President Trump cited national security concerns in Wednesday’s White House proclamation as the reason for the tariffs.  According to information from the Department of Commerce and the United States Trade Representative office, “the national security concerns remain and have escalated. The COVID-19 pandemic exposed critical vulnerabilities and choke points in global supply chains, undermining our ability to maintain a resilient domestic industrial base.”

Based on President Trump’s comments Tuesday afternoon, the tariffs are permanent, with no room for companies or countries to negotiate. 

He later said that if countries retaliated, he could expand the tariffs. 

It sounds simple. One executive order and imported vehicle prices increase by 25%. But the process will be far from simple as details are still being worked out. Dealers, manufacturers, and suppliers will have several months of volatility and uncertainty.

Approximately 46% of the vehicles sold in the U.S. are imported.

A 25% tariff on several automotive parts, such as powertrain components, electrical components, transmissions, and engines, will be in place by May 3, even if they are part of vehicles built in the U.S. Nearly 60% of all vehicle parts in U.S.-assembled vehicles are imported.

Automakers importing vehicles built in Canada and Mexico will have to certify their U.S. content so that only non-U.S. content is taxed, the White House said. The Commerce Dept. is developing a process to calculate and verify the percentage of U.S. versus non-U.S. content for vehicles built in those two countries. Until that system is in place, automotive parts that are compliant with the current United States-Mexican-Canadian Agreement will be tariff-free.

The Commerce Dept. has 90 days from March 26 (the date the tariffs were announced) to develop the process. The timeline might be difficult to hit. The National Highway Traffic Safety Administration American Automobile Labeling Act provides annual reports detailing model-specific percentages of vehicle content and country of origin. However, the reports combine U.S. and Canadian vehicle content, which will now have to be separate categories.

Based on the 2025 model year report, no vehicle will be spared — even those assembled in the U.S. — because every vehicle incorporates imported components.

An intriguing report from the Canadian CBC late Thursday indicated that vehicles imported from Canada with more than 50% U.S. parts will not be subjected to the tariff, while vehicles with less than 50% U.S. parts will be assessed a 12.5% tariff. The report is based on comments U.S. Commerce Secretary Howard Lutnick made to Ontario Premier Doug Ford late this week, along with anonymous sources.

NORTH AMERICAN PRODUCTION TO DROP 30%

Using the “worst” case scenario of a full 25% tariff on every imported vehicle, the impact — both short-term and long-term — is unknown. Both S&P Global Mobility and Cox Automotive predict North American production will decline in the first month by as many as 20,000 vehicles a day — about 30% of total production.

Automakers will also determine the overall impact of the tariffs depending on their pricing strategies and relationships with suppliers. However, there seems to be little appetite for automakers or suppliers to take hits on their profitability, which means the customer likely will pay much higher prices for vehicles, which most analysts predict will range from $4,000 to $10,000 higher than current prices. Some analysts say the increases could hit as high as $15,000.

Incentives will also likely disappear within the first few weeks.

Whether tariffs are assessed based on the percentage of non-U.S. content within each vehicle is a question that has not yet been answered.

Of course, the impact will be different for each brand. Some automakers are more exposed than others, depending on the percentage of vehicles they import. For the short term, some OEMs with a bigger inventory supply may be better positioned.

Much of it depends on how different countries — which are still processing the news — will react.

Reactions from Korea, Europe, Japan, Canada, and Mexico are still developing, with Europe still expressing hope for a compromise while Canadian officials are threatening to inflict as much pain as possible on the American people with retaliatory tariffs.

U.S. PLANT CAPACITY A FACTOR

Although many have praised the tariffs — including UAW President Shawn Fain, who said it’s “time to end the free trade disaster” U.S. production will not increase much in the next couple of years. It takes three to four years to bring a new automotive plant online, and automakers have little wiggle room at existing plants.

Ward’s Intelligence places current U.S. manufacturing plant capacity at just over 65% (80% utilization is considered to be near full capacity), but much of the utilization is due to a lack of electric vehicle demand. Overall, there is not enough plant capacity in the U.S. for automakers such as Toyota, Honda, General Motors, Ford, or Stellantis to move high-volume production from Canada or Mexico.

Building new plants takes time. The new $7.6 billion plant that Hyundai officially opened in Georgia this week has been in development since January 2022.

Even configuring existing plants takes time and investment. Stellantis announced in January it is investing $1.2 billion to reopen its shuttered Belvidere plant in 2027 with plans to build a mid-range pickup truck there. Whether Stellantis moves production of a vehicle it currently manufactures outside the U.S. to Belvidere remains to be seen.

Nevertheless, automakers are clearly evaluating current manufacturing plans and product initiatives and will likely start announcing more investments in U.S. plants.

IMPACT

Although the tariff saga will continue to be an evolving story, below are several areas in which the auto industry will be impacted.

  1. Analysts predict the impact will mirror (likely exceed) what the industry saw with the chip shortage.
  2. Both S&P Global Mobility and Cox Automotive predict North American production will decline in the first couple of weeks by as many as 20,000 vehicles a day — about 30% of total production.
  3. Cox Automotive adjusted its 2025 sales forecast from 16.3 million units to 15.6 million units.
  4. Depending on the brand, vehicle pricing could increase between $4,000 to $10,000 or more. (Some Jaguar Land Rover dealers are saying they expect prices to jump $10,000+ for their vehicles). Suppliers have already informed the OEMs that they cannot take on any more price reductions.
  5. Incentives will disappear as inventory thins.
  6. Lower-priced vehicles will be hit hard, as 10 of the 20 current models listed below $30,000 are imported. Models built in Mexico and Canada could see prices jump by as much as $5,855, according to Cox Automotive. Automakers may have to make tough decisions on which nameplates to keep or scuttle.
  7. Potential losers on the less expensive end of the spectrum may include the following:
    • Chevrolet Trax (built in South Korea)
    • Jeep Compass (built in Mexico)
    • Dodge Hornet (built in Italy)
    • Ford Maverick (built in Mexico)
    • Ford Bronco Sport (built in Mexico)
    • Hyundai Elantra and Venue (built in South Korea)
    • Kia Soul (built in South Korea)
    • Kia K4 (built in Mexico)
    • Nissan Kick, Versa, and Sentra (built in Mexico)
    • Subaru Forester (built in Japan)
  8. German brands are likely to be hit hard.
    • Volkswagen imports more than 70% of its vehicles from Mexico and Europe. Meanwhile, Porsche or Audi do not build any vehicles in the U.S.
    • About 36.5% of the vehicles Mercedes-Benz sells in the U.S. are built in the U.S., with another 3.5% manufactured in Mexico and 60.1% built in Europe.
    • BMW produces its 2-Series Coupe, its 3-Series, and M2 models in Mexico.
    • Mercedes imports nearly 65% of the vehicles it sells in the U.S.
  9. The impact on Japanese brands will be mixed, but one analyst predicts a $29 billion hit combined on profitability for Japanese automakers.
    • Honda is one of the least exposed automakers, as almost 60% of its U.S. market is built in the U.S. — third behind Ford and Stellantis. Executives have said the automaker will adjust its manufacturing plans and likely will move more production to the U.S.
    • Toyota imports nearly 55% of its vehicles into the U.S. Most of its pain will be felt with the Tacoma, which is built in two plants in Mexico and accounts for 10% of its overall sales in the U.S. The Rav4 (at more than 475,000 sold, it was the best-selling non-truck vehicle in the U.S. in 2024) is mostly built in Canada, but an estimated 70% of its components are sourced from the U.S.
    • Nissan is in a tough spot as it is beginning to restructure its business to get costs in line while trying to find an investment partner. Several analysts believe the automaker is highly exposed, with 55% of its vehicles imported into the U.S.
    • Of the top 12 manufacturers, Mazda is last in U.S. manufacturing, building only 20% of its vehicles here.
    • Subaru imports 54% of its U.S. vehicles, most of which are the Forester, which is built in Japan. The Ascent, Crosstrek, Outback, Legacy, and Impreza are built in the Indiana plant.
  10. Hyundai and Kia combined import 62% of their vehicles into the U.S. from both Mexico and South Korea. Hyundai just opened a $7.6 billion EV plant in Georgia this week. Although exposed for the next couple of years, the automaker does appear intent on increasing its U.S. manufacturing footprint.
  11. The Big Three, General Motors, Ford, and Stellantis, will be impacted at various levels.
    • Ford, building nearly 80% of its vehicles in the U.S., is the least exposed of all automakers. But it does source engines from a Canadian plant for its F-150 trucks.
    • General Motors will feel the impact, having imported about 750,000 vehicles from Canada and Mexico last year. The Silverado Heavy Duty truck is produced in Canada, while several models — Cadillac Optiq, Chevrolet Blazer, Equinox (gas & EV), Chevrolet Equinox, GMC Terrain, Chevrolet Silverado/Cheyenne crew cab, and the GMC Sierra crew cab — are built in its three Mexican plants.
    • Stellantis is second to Ford in domestic production, building more than 68% of its vehicles here.
  12. At some level, the used vehicle market will catch fire again. Inventory is already limited, and that dynamic will increase as available off-lease inventory hits its trough later this year and into 2026, resulting from the steep decline in leasing in the early part of this decade. Add the tariff component of significantly higher prices on new vehicles, and dealership profits might explode again as used vehicles become more attractive to the consumer.
  13. The EV tax rebate is still in play — probably not for much longer, but it is still available for now.

CONCLUSION

Uncertainty remains the driving dynamic here. Much of what we think or know today may be different next week. Impacted countries and automakers are lobbying the White House hard to gain both clarity and more favorable terms.

For dealers, thinking outside the box, getting creative with the marketing, and communicating with customers while not getting distracted by the noise will be critical in the next few days and several weeks. The key will be finding ways to make sure the consumer doesn’t avoid the dealership because of the tariff noise.

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