U.S. Dealers Expect Foreign Cars to Cost More If Auto Tariffs Enacted A 25% tariff would increase the average price of an imported vehicle in the U.S. by $5,800, the auto industry’s main lobbying group says Some car dealers are stockpiling popular imports such as SUVs in anticipation of a 25% tariff on imported cars. Shown, the Audi Q7 Quattro SUV on display at the New York Auto Show in March. Photo: Lev Radin/Pacific Press/Zuma Press By Adrienne Roberts Updated July 17, 2018 4:59 p.m. ET 109 COMMENTS Consumers should expect higher prices on imported cars if President Donald Trump’s proposed 25% tariff on foreign-built vehicles shipped into the U.S. is enacted, according to car sellers. Car makers said they plan to pass on the added costs to customers, which dealers and car sellers said could lead to a decline in sales. About 44% of all U.S.-sold cars were imported into the country last year. Because of the higher price tag, auto retailers said, they may curtail orders of vehicles built abroad and focus on used cars with higher margins. The tariff could also, to a lesser extent, inflate prices for cars built in the U.S., because many of them use foreign-built car parts, car companies said. ClimbingAverage U.S. car prices have steadilyincreased, and tariffs could push them upfurther.Source: J.D. PowerNote: 2018 data are for the first half of the year. 2010’12’14’16’1826,00027,00028,00029,00030,00031,00032,000$33,000 “There is no doubt the auto retail industry will be adversely affected,” car dealer David Rosenberg said in an interview. “We’ll see price increases across the board and a lot of that will be passed on to the consumer. Sales will go down.” Mr. Rosenberg, who has dealerships in New England, is taking Mr. Trump’s threat seriously. He has already begun stockpiling foreign-built Mercedes-Benz and Audi sport-utility vehicles based on worries that the tariff, if enacted, would make those vehicles more expensive to order from overseas. The average price of a car has been rising steadily for nearly a decade. Car makers and dealers say a 25% duty would only further increase costs, adding several thousand additional dollars to the sticker price of an imported vehicle. Mazda and Mitsubishi are expected to be hurt more than many other foreign brands because they are 100% reliant on imports to stock U.S. dealer lots and typically sell to price-sensitive buyers. The Alliance of Automobile Manufacturers, the auto industry’s chief lobbying group in Washington, estimates a 25% tariff would increase the average price of an imported vehicle by $5,800. For some top-selling imports, such as the Japanese-built Subaru Forester, Tim Kelly, owner of Kelly Subaru in Chattanooga, Tenn., estimates the tariff could add an extra $5,000 to the price tag, pushing the vehicle’s cost far higher than other SUVs that aren’t subject to the import duty. If that were the case, Mr. Kelly said, it wouldn’t be worth stocking the Forester. The increase would make it “wildly uncompetitive,” he said. “Why not buy an Outback?” Mr. Kelly added, which could end up being cheaper than the Forester if the tariff were imposed. The larger Subaru Outback is built in Lafayette, Ind. We Want to Hear From You Is your business affected by tariffs? Tell us how. Several dealers contacted by The Wall Street Journal said they aren’t convinced the tariff will go into effect. They said they are waiting to make contingency plans until they have a clearer idea about if and when the tariff will be enacted. Also, luxury brands may be more insulated from the tariff because their buyer base can likely afford a few thousand extra dollars on top of the typical selling price, said Jeremy Acevedo, an analyst at Edmunds.com. Due to the popularity of leasing in the luxury market, he said, the tariff could be absorbed into the monthly lease payment and might only drive up a payment by about $50 a month. Mr. Trump has repeatedly taken aim at foreign and domestic auto makers in his efforts to pressure companies to expand U.S. manufacturing jobs. He has had some success. Ford Motor Co. last year scrapped plans for a $1.6 billion assembly plant in Mexico after facing criticism by Mr. Trump for more than a year. And Toyota Motor Corp. announced plans to build a $1.6 billion Corolla sedan plant in the U.S. Mr. Trump had pressured Toyota to drop plans for making that model in Mexico. Related Whirlpool Wanted Washer Tariffs. It Wasn’t Ready for a Trade Showdown This Time Around, Chinese Consumer Products Would Face Tariffs ‘Shocked’ by Latest U.S. Tariff Plan, Beijing Seeks Retaliatory Action In May, the White House asked the Commerce Department to investigate whether it could use a national-security law to impose a 25% tariff on all U.S. auto imports, including assembled vehicles and car parts. A public Commerce Department hearing on the president’s proposal is scheduled this week. The Commerce Department said after completing an analysis it will make a report for the White House “within a couple months,” adding “no proposal for action has yet been made.” Audi declined to comment. Mazda didn’t respond to requests for comment. Subaru, in a statement, said it is monitoring the situation and if a tariff is implemented, it would “have to consider our options at that time.” Mercedes maker Daimler AG said it supports trade policies “that produce favorable outcomes for all participants” and that proposed tariffs on imported vehicles and parts could “invite retaliation by trading partners and depress U.S. sales volumes.” Mitsubishi, in comments submitted to the Commerce Department in June, said the tariffs could restrict consumer choice and make vehicles less affordable. General Motors Co. last month said proposed tariffs would raise its costs and eventually lead to higher prices for consumers. Last year, about 36% of GM’s U.S. sales were of imported vehicles made outside the U.S., or about 1.1 million vehicles, according to forecasting firm LMC Automotive. The warnings come as U.S. auto sales continue at a near-record pace, thanks partly to a strong economy, low unemployment and tax cuts. The average price paid for a vehicle in the U.S. has climbed in recent years, hitting $32,225 through the first half of 2018, up nearly $3,000 from five years ago, according to data from market-research firm J.D. Power. Some analysts estimate the tariff could cut U.S. auto sales by roughly two million vehicles a year. Last year, the industry sold 17.2 million new vehicles in the U.S. If the tariff is enacted, consumers would have a window of one or two months to buy a car before prices start to rise because dealers will have lower-priced inventory stocked on their lots, analysts say. “This is a recipe for a market contraction,” said Mr. Acevedo. “There is no way car companies could eat the cost of a tariff because margins are already so slim on new cars. Shoppers would at least be hit with some of that tariff.” Ryan Gremore, president of O’Brien Mitsubishi in Normal, Ill., said if a tariff were imposed, he would give up on selling new cars altogether and focus instead on his used-car retail business, where profits margins are higher. Mr. Gremore said Mitsubishi, which sells a range of modestly priced sedans, hatchbacks and SUVs, tends to attract a budget-minded buyer who would be turned off by a price increase. “We wouldn’t get a warm reception from customers,” he added. “We have to survive.”
I don't live in the US but I drove a rental Caddy CTX last Christmas visiting cousins in Louisiana. Clearly they have done their best to emulate a BMW 5 series I guess. It was not a bad car, not as good as the BMW which I have also driven however not a huge difference. Competition with BMW has helped Cadillac, clearly they would not be selling more cars in China than they do in the US had they not had to up their game from competition. So why don't more people buy the cheaper Cadillac? Is it still an old man car in the states? Just ugly?
Looks like all those small amounts of dollars in your paycheck after that tax reform will be flying right back out the window.......
The title of the article mentions an estimated price increase of $5,800 for an imported car. What the article does not mention is that there are other estimates which indicate that the price tag for a US-built car will increase by about $2,000 as they use many imported parts and components. So, no matter what car a US consumer selects, it will be more costly after these tariffs have been put in place.
Why do you think so? I don't see the connection between Trump versus the car industry on the one side, and the oil companies on the other side.