Car manufacturers have already begun to adjust to the 25 percent tariff that US President Donald Trump has imposed on car imports, from pausing production to increasing prices or stopping certain models.
An additional levy came into force on Thursday and refers to all cars not manufactured in the United States.
The Bank of America estimates that about 7.3 million vehicles or eight percent of global car sales will hit the tariff.
Ford CEO Jim Farley said in February that Tariffs would expose the car manufacturers “a lot of costs and a lot of chaos”.
Similar tariffs on parts of the car will also gradually take effect.
Shock stickers, sales fall?
Tariffs ask two basic questions for the US car market: how much will the price increase and in what extent will consumers buy fewer vehicles?
Volkswagen has already informed his traders USA that he will add a “import fee to import” cars he delivered to the country from Europe and Mexico, according to the Publication Automotive News store.
Bank of America estimates that US vehicles would increase by around $ 10,000 if manufacturers fully transfer the costs of tariffs and maintain their profit margins.
“However, we do not expect consumers to absorb prices in full,” analysts at the bank said.
Car manufacturers “are more likely to sell vehicles in Breakeven until the production print is balanced,” said US consumers will see a price increase of about $ 4,500.
The US consumers rushed to MPs to buy or order vehicles before the tariffs entered into force.
Imported medium-range vehicles, such as Chevrolet Silverado Pick-up and Toyota Rav4 SUV, will most likely feel a pinch of higher tariffs.
But even luxury manufacturers like Porsche have been able to have problems absorbing the cost of tariffs on their low-class models, such as Macan SUV of the German car manufacturer, said Cigdem Cerit, an auto industry expert from Fitch Rating.
Ferrari was the first car manufacturer to announce the price increase – as much as 10 percent – on vehicles sold in the United States, its best market.
Ford, one of the companies most produced in the United States, seized the moment to start an advertising campaign labeled “from America, for America”.
Canadian-Mexican chaos
American car manufacturers, GM, and jeep manufacturer Stellantis-all invited Trump to facilitate the tariffs. This is because they have developed chains and supply factories in Canada and Mexico who have enjoyed free trade arrangements with the United States for decades.
But now a free trade contract between three countries, USMac, is only related to the parts they have made.
Stellantis also makes Chrysler, Dodge and Ram Truck vehicles on Thursday that he will stop production in some facilities in Canada and Mexico.
His Chrysler factory in the Canadian city of Windsor, which employs 4,000 people and sits over Rijeka from the American main city of Detroit, will stop production from April 7 to April 21.
Nissan plans to stop selling in the United States QX50 SUV and QX55 crossover Coupe SUV, which are both made in their Mexican factory in Aguascalientes.
Made in the US -U
Trump has stated that the goal of tariffs is to encourage production affairs to return to the United States, but it is not clear if it will be achieved.
Deloitte Auto Auto Analyst Guillaume Crunelle said car manufacturers will have to ask themselves: “Is it more competitive to produce in the United States, with a weaker market or pay customs duties?”
Hyundai and Stellantis in South Korea are planning to open or reopen the factories, but the degree into force of tariff on Thursday accelerated the announcements.
Nissan, who planned to stop the production of his horny SUV in Tennessee, as part of the cost reduction measures, said he would eventually retain production there to avoid tariffs.
Volvo indicated that it would increase production at its factory in South Carolina and look at the production of a new model there.
But such changes can take – several years to build a new production line in the existing facility. Car manufacturers then have to convince their suppliers – who were also weakened by the transition to electric vehicles – to follow.
The Bank of America estimates that an additional million vehicles at the top of 10.6 million could be produced in the United States, which were gathered in the country last year, but hiring enough workers could show problematic.
This story is originally shown on Fortune.com
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