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Car manufacturers can respond to the new rates of 25 % of President Trump on cars and important parts in different ways. But everyone cost money and will bring at higher cars prices, analysts say.
Manufacturers can try to move production from countries like Mexico to the United States. They can try to increase the number of cars they already make here. They can stop selling imported models, in particular the less profitable ones.
But whatever they decide car manufacturers, car buyers can expect to pay more for new and used vehicles. Estimates vary widely and depend on the model, but the increase may vary on $ 3,000 for a car made in the United States to well over $ 10,000 for imported models.
Those figures do not take into account the additional rates that Trump said he would announce next week to punish countries that impose rates on US goods. He also stated that he would further increase rates if commercial partners such as Canada and the European Union increase rates in response to its car rates, leading to a growing tit-per-tat commercial war.
“It will be disruptive and expensive for American consumers for several years,” said Michael Cusumano, a management professor at the Mit Sloan School of Management.
Mr. Trump has long branded rates. But many automotive managers had hoped that his threats were a negotiation tool. Mr. Trump broke those hopes on Wednesday when he told the White House that the rates were 100 %permanent “.
Trump has framed rates as a way to report automotive production in the United States. The United Authed World Union has agreed, saying that car manufacturers could reopen plants in places like Lordstown, Ohio, or expand production in the city such as Warren, Michigan, where car workers were fired.
“It is now on the car manufacturers, from three large three to Volkswagen and beyond, report good union work in the United States,” said Shawn Fain, president of the UAW, in a statement on Wednesday, referring to General Motors, Ford Motor and Stellantis, owner of Chrysler, Jeep and Ram.
But transferring the factories is expensive and takes time. Car manufacturers usually need at least two years to create a new assembly line and make sure that the vehicles it produces satisfy quality standard. To fully avoid rates, they should also transfer diabolically complicated supply chains that often involve suppliers in dozen countries.
Rates could encourage companies to choose offices in the United States instead of Mexico or Canada when they are contemplating where to expand production or build a new model. But choosing a site due to rates and not because it is the most efficient place for production, it would have a cost for consumers.
Some companies can hesitate to make those decisions, which can cost hundreds of millions of dollars, because they fear that Mr. Trump, despite the insurance on the contrary, can change his mind. Or the next president could reverse his rates.
“What we feel from many customers is:” How do we justify capital expenses without knowing if it is a long -term process? “” Said Kevin Williams, Senior Director of the Clark Hill law firm, specialized on the market. “Do that investment and in two years they say:” It doesn’t matter “.”
The car manufacturers, many of which have refused to comment, will probably avoid conveying the entire cost of the rates for consumers. If prices increase too much, sales could fall, leading to a spiral of death sinking of revenue and increasing costs. Economists fear that the financial interruption caused by the rates can help cause a recession.
Some car manufacturers have accumulated parts and the cars finished before the rates begin, but this will maintain the prices only for a while.
“Rates will pay people more for cars and people will buy less cars,” said WC Benton, professor of operational operations and management of the supply chain at Ohio State University.
The new cars are already outside the reach of many Americans: the average sale price in these days is greater than $ 48,000, according to Cox Automotive. The prices of used cars should also increase, as they did during the pandemic, since more buyers seek options at affordable prices.
Most car manufacturers are not extremely profitable and have a limited financial hall to maneuver. General Motors, which is among the most profitable companies, has had a net profit on the sales of 3.2 percent last year. As a result, car manufacturers will have to transmit a large part of the cost of the rates to their customers.
In this case, the rates could add $ 15,000 to the price of a RAM 1500 pickup, almost $ 12,000 to a Toyota Tachoma pickup, $ 9,000 at a Subaru Forester SUV and $ 6,000 at a Nissan Sentra sedan, according to Isecar estimates, a car shopping site online.
Some car manufacturers are already increasing prices. Ferrari, whose Italian -made sports cars sell for hundreds of thousands of dollars, said on Thursday that it would increase prices up to 10 percent on some models in response to rates.
The car manufacturers can stop selling some less profitable models, which tend to be smaller and more convenient. They will promote cars and trucks made at national level, many of which are larger and more expensive. All the main car manufacturers, including foreign brands such as Mercedes-Benz, BMW, Volkswagen, Honda and Toyota, have great factories in the United States.
But no car will be free from the rates because they all have foreign manufacture parts, which generally represent at least a third of the value of the vehicle. That part will be subject to a 25 %rate, according to the Trump administration.
“There is no American car,” said Simon Geale, executive vice -president of Proxima, a consultancy company that advises supply companies.
Some car manufacturers may avoid making great changes to their operations in response to rates, bet that the consequences will be so serious that the Trump administration will have to backped.
“There will be an incredible repercussions by American consumers,” said Cusumano del Mit “I hope there would be an answer to this.”
Ana Swanson Contributed relationships.