U.S. tariffs are having a major impact on the auto industry, but German automakers are bearing a significant brunt of the pain, prompting new concerns about pricing for popular luxury import brands in the U.S.
The details: With a 15% baseline tariff on autos shipped from Europe on top of a 2.5% levy, German car exports dropped 14% in the first three quarters of 2025, reports Reuters, which is why some German automakers have been sounding the alarm.
Volkswagen said in October that it expects a tariff hit of up to 5 billion euros ($5.8 billion US) in 2025, with its subsidiary Porsche being dealt a major blow by the levies, along with EV setbacks.
Mercedes-Benz indicated in July that the automaker could see a tariff effect of 362 million euros ($418 million US) on adjusted operating profit (EBIT) in 2025.
What they’re saying: “15% tariff on every exported vehicle will result in billions of dollars in additional costs for us when exporting vehicles to the United States,” said Jürgen Mindel, a spokesperson for the German Association of the Automotive Industry (VDA), per an August DW report.
Why it matters: When German luxury brands are absorbing billions in tariff costs while domestic alternatives face smaller burdens, the pricing gap narrows. That shifts the calculus for buyers choosing between a BMW and a Cadillac, or a Mercedes and a Lincoln.
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Between the lines: As German automakers work to try to navigate the new industry norm with U.S. tariffs amid other market headwinds, there are growing concerns about how much of the additional costs brought on by the levies car companies will look to pass on to buyers.
Audi, which said it was absorbing some of the costs early on, raised prices in August across most of its 2026 lineup by $800 to $4,100 per model while adding three years of free maintenance to help justify the increases.
Porsche announced on December 10 that it will increase its new vehicle prices in January, ranging from 1.2% to 2.9% depending on the model due to “current market conditions.”
So far, Mercedes has held relatively firm to its commitment to absorb the costs, with 2026 model year increases of only a couple of hundred dollars, per Mercedes-Benz of Olmsted General Sales Manager Doug Horner.
BMW has announced that it will increase its prices by about 1% in 2026, which amounts to roughly $400 to $1,500, excluding the automaker’s EV lineup and a few other select models.
What they’re saying: “Last year was a really robust year. This year, we’re down a little bit in sales, but I think the consumer, right now, is very worried. They’re trying to figure out where prices are going with these tariffs,” said Tom Maoli, owner of Celebrity Motor Car Company in New Jersey, which sells BMW and Mercedes-Benz vehicles (via the DW report) Maoli added that he expects pricing to increase 10% on new vehicles, as automakers look to pass on some of the additional costs to consumers.
For dealers, that means watching closely for pricing volatility, allocation changes, reduced model variety, and potential pullbacks in U.S. market investment as many of these automakers prioritize viability over growth.
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