Automakers will have to absorb most tariff costs to ‘maintain reasonable volumes,’ says J.D. Power

Now that auto tariffs are in place, we’re getting a clearer picture of how it could all play out in the car market. Best advice? If you’re in the business, you might want to consider trading in those big summer vacation plans for a local staycation—just to play it safe.   

The details: A new report by J.D. Power—which cautions that any assessment of the tariffs is “fluid”—concludes that the competitive nature of the U.S. automotive market, coupled with the highly asymmetric impact of tariffs, will disrupt the business in several ways.  

• The tariffs are expected to drive the average price for a new vehicle up 5% or $2,300.

• Overall, the volume effect could be as low as 5% or as high as 12% from pricing actions alone.

• The annualized retail sales pace is expected to decrease by 8%, or by 1.1 million sales.

Bigger impact: In terms of U.S. retail sales, current tariff exposure is approximately $62 billion for the industry, which translates to an average of $4,782 per vehicle.

The good news? Those 5% or $2,300 price hikes aren’t expected to start showing up for a few months, so there’s still ample time to start pulling together those plans for a truly memorable summer staycation. 

Between the lines: The impact of the tariffs will vary from one automaker to the next—with brands that rely heavily on imported vehicles and components facing steeper cost increases than those with more localized production and supply chains.

• The unequal mix of models among automakers will create an imbalance even within the brand portfolios of individual manufacturers. 

• This and the competitive nature of the market will make it tough for highly tariffed brands to pass on those price increases to buyers while remaining profitable. 

Bottom line: There’s no need for buyers or dealers to go into panic mode (just yet)—based on J.D. Power’s report, given that it appears that automakers will bear the brunt of the tariffs. Heed caution, though, given that even J.D. Power notes that everything should be considered fluid at this point.

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