Impact of Tariffs on the Auto Market: Dealers Warn of Future Sharp Price Increases
Tariffs are already changing the automotive industry, creating uncertainty and affecting the final cost of vehicles for consumers. Previous price increases have been moderate, however, a major dealer group in the US is now warning that tariffs could soon send prices soaring.
The main consequences already being observed are:
Automakers Begin Passing Costs to Buyers
During a recent earnings presentation, Jeff Dyke, President of Sonic Automotive, the fifth-largest US auto dealer, stated that manufacturers are already beginning to pass increased costs on to consumers. In his opinion, the current tariff structure is too expensive for brands to bear indefinitely.
The tariffs are too high for some of these brands, and they are going to pass the price on to the buyers. This is already happening.
Legal Uncertainty of Tariff Policy
These statements come against the backdrop of a situation that remains complex and far from resolved. The US Supreme Court recently overturned certain “reciprocal tariffs” imposed under the International Emergency Economic Powers Act. However, Section 232 sectoral tariffs remain in effect. This means many imported vehicles and parts are still subject to significant customs duties.
Current Cost Absorption May Be Temporary
So far, transaction prices have not risen across the board. Analysts note that since the latest round of tariffs took effect, prices have increased by about one percent. However, manufacturers have been adjusting the situation behind the scenes all this time.
Sometimes, instead of a loud increase in the Manufacturer’s Suggested Retail Price (MSRP), they raised fees such as destination charges, or canceled and reduced incentives. In other cases, brands implemented several increases throughout the year instead of a one-time adjustment for the model year. Spread over time, such changes are perceived as gradual rather than sharp.
Some manufacturers are raising the MSRP on higher-class models, betting that buyers in this segment are less price-sensitive. Ultimately, all these methods lead to one thing: buyers pay more for the cars they want. Dyke’s warning suggests that what we have seen so far may only be the beginning.
Pressure is Mounting, and Consumers May Feel It
Manufacturers have tools to soften the blow, such as price adjustments, reducing the list of standard equipment, or cutting incentives, but if tariffs remain at the current level, something has to give. For now, the increases are gradual and easy to miss. However, according to the warning from one of the country’s largest dealer groups, pressure is mounting. Soon, consumers may see and feel it much more clearly.
The tariff situation creates a cascading effect in the supply chain, ultimately affecting every buyer. While some brands have shown restraint so far, the prolonged maintenance of customs barriers could force even the biggest players to reconsider their pricing strategies. This could lead not only to direct price increases but also to changes in model lineups, option availability, and overall purchase terms. Long-term consequences may include a market reorientation towards less expensive vehicle categories or an acceleration of production localization; however, these processes take time, while the financial pressure on consumers may become noticeable much sooner.