Cox Automotive has shifted its take on the impact of tariffs—indicating that the threat to car sales might not be nearly as bad as earlier estimates suggested.
The details: Jonathan Smoke, chief economist for Cox Automotive, said that while the tariffs are creating some uncertainty in the industry amid higher interest rates, the market is weathering the storm rather well.
Cox previously predicted that the costs associated with tariffs could drive the price of new vehicles up 17%.
The insights company now projects that the average price of new vehicles will only increase 4% to 8%.
Cox Automotive hasn’t changed its prediction that the tariffs will lead to 700,000 fewer vehicles sold in the U.S.—projecting total sales of 15.6 million vehicles this year, down 4.3% from an original forecast of 16.3 million vehicles.
What they’re saying: “What we have seen thus far has not been catastrophic. However, it represents a point of transition,” said Smoke.
Why it matters: Cox Automotive’s optimism about the market should provide some reassurance to dealerships that the more immediate impact of the tariffs can be mitigated to some extent.
Between the lines: However, Cox cautions that the longer the tariffs are in place, challenges such as moving vehicles across the border, pausing imports, and the strain of production changes could significantly impact the market.
These factors could lead to even higher vehicle prices—with some nameplates not being able to survive the fallout.
Some brands are already dealing with inventory challenges—stemming from pull-ahead sales before the tariffs went into effect.
“We know there's going to be further pricing pressures. We're waiting to see if the consumer can hang on,” added Charlie Chesbrough, Cox Automotive’s senior economist.
Bottom line: Dealerships can take some reassurance that the market is holding up better than expected in the short term, but they should remain cautious: prolonged tariffs could lead to inventory issues, supply chain disruptions, and increased pricing pressure, which may challenge profitability down the road.
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