If you haven't heard (though we're guessing you have), the new 25% tariff on imported vehicles and parts is about to shake things up for all of us in the industry. Especially considering imported vehicles accounted for nearly half of the 16 million new cars purchased in the United States in 2024.
With vehicle prices potentially jumping by thousands of dollars, both dealerships and manufacturers need to get ahead of this challenge. Let's dive into some practical strategies that can help you protect your customers—and your business.
1. Price smarter, not harder
When it comes to your pricing strategy, transparency is key.
When customers see sticker prices climbing from around $5,000-$15,000, they're going to have questions. Be upfront about why prices are changing, but also get creative with financing options, loyalty incentives, or special promotions that can soften the blow. Your customers will appreciate the honesty, and you'll build trust during a challenging time.
2. Stock up before costs surge
Time to get strategic with your inventory! If you can accelerate shipments before these tariffs fully kick in, you'll have a competitive advantage with pre-tariff-priced vehicles. This isn't just about helping customers—it's also about avoiding excess inventory that becomes harder to move as prices climb across the market.
3. Diversify supply chains
For our OEM friends: now's the time to look at where your parts and vehicles are coming from. Could production be shifted to countries with more favorable trade agreements? Or maybe it makes sense to bring more manufacturing stateside? With additional import duties on engines and transmissions coming in May, rethinking your supply chain could lead to significant savings.
4. Engineer for savings
Let's talk tariff engineering… it's not cutting corners, it's being smart about product classification. By modifying certain aspects of your vehicles to align with lower-duty classifications, you can reduce costs without sacrificing the quality your customers expect. This is especially relevant for luxury models that could otherwise see price hikes of up to $20,000!
5. Collaborate across the value chain
We're all in this together, right? Manufacturers and suppliers need to have frank conversations about sharing tariff costs. No single player in the automotive ecosystem should bear the full burden—and ultimately, a balanced approach means we can minimize the impact on car buyers.
6. Tap into Foreign Trade Zones (FTZs)
OEMs, if you're importing goods for manufacturing and then exporting, Foreign Trade Zones could be your new best friend. These designated areas can help you avoid duties on exported vehicles, bringing down your overall production costs.
7. Shift focus to affordable alternatives
With entry-level vehicles getting hit hard by these tariffs, dealerships should be ready to pivot. That might mean putting more emphasis on your used inventory or highlighting those fuel-efficient models that give buyers more bang for their buck.
As Erin Keating, Executive Analyst at Cox Automotive, points out, "Affordable new vehicles are already few and far between," and these tariffs could push many potential buyers right out of the market.
8. Prepare for inflation beyond cars
Remember, it's not just about the sticker price—maintenance, repairs, and insurance costs are all going up as parts get more expensive.
Consider offering bundled service packages or extended warranties that help customers manage these ongoing expenses. It's a win-win: they get predictability, and you secure long-term service business.
The bottom line
Look, there's no sugar-coating it; these tariffs will create some serious challenges for our industry. The Anderson Economic Group estimates that the impact on U.S. consumers could surpass $30 billion in the first year alone.
Fear not! By being proactive and implementing some of the above strategies, we can navigate these choppy waters together.
How is your dealership or company preparing for these changes? Drop a comment below—we'd love to hear what's working for you!
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