U.S. Dealers Expect Foreign Cars to Cost More If Auto Tariffs Enacted

[mahatmakanejeeves]

My story on how the car industry could change if 25% tariff on auto imports is enacted: dealers say there could be fewer choices, prices would rise

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BUSINESS AUTOS & TRANSPORTATION AUTOS

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

By Adrienne Roberts

https://twitter.com/AdrRoberts
[e-mail]

Updated July 17, 2018 4:59 p.m. ET

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. ... “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.
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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.”
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Write to Adrienne Roberts at [e-mail]

[exboyfil]

1. I wonder the demand curve on new cars is

I got to think it is pretty elastic. Car repair mechanics are going to have a field day with the tariffs.

[JayhawkSD]

2. You cannot have it both ways.

We all want the good manufacturing jobs brought back to this country. We also want the low prices of imported goods. We can't have both. Pick one.

Maybe tariffs is the way to bring back manufacturing jobs, maybe not. But doing nothing is certainly not going to bring them back. Nor is complaining about how "imports are not going to be available, so we're going to have to buy American cars," which would mean that more car manufacturing jobs had been created.

You cannot create change without disrupting the status quo. We all want change, but we want that change without anything changing.