Industry News: Possible Tariffs Could Cost Automakers Between 1 to 2 Million Vehicles Sold

[William Maley]

If the Trump administration goes forward with placing a 25 percent tariff on new cars, it could cost automakers between one to two million sales.

Analysis done by researcher LMC Automotive said if automakers pass on the full 25 percent tariff to customers, it could cut sales by about two million - about 10 percent of annual U.S. sales. If automakers absorb some some of tariff, the sales drop would reduce to just a million.

Jeff Schuster, senior vice president of forecasting for LMC Automotive tells Bloomberg that consumers would react in one of three ways.

• Look at the used car market
• Move to domestically built products with cheaper pricetags
• Put off buying a new car with the hope this is only temporary

While new car sales have been slipping from the record high of 17.6 million in 2016, LMC Automotive is predicting a still-strong 17.1 million deliveries by the end of the year.

Source: Bloomberg

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[G. David Felt]

I believe auto makers who are on top of a segment will if they have to absorb some of the cost to maintain their market share, but I fully expect the bulk to be passed onto the consumer and this is going to hurt everyone.

This blanket 25% drop across the board is just stupid. Would have been better to say that if a country like China is putting a 25% tariff on US auto's imported into China and we are only putting a 2.5% tariff on Chinese auto's imported into the US we match each country tariff for tariff. Honor the open treaty's we have but be a surgeon with a scalpel rather than a bully with a baseball bat.

Approach industry to industry not just blanket country apply a tariff on the whole thing.

[frogger]

Good luck with this, since so many of the parts are internationally manufactured and cross between the US and its trade partners multiple times before final assembly.

 

[G. David Felt]

1 hour ago, frogger said:

Good luck with this, since so many of the parts are internationally manufactured and cross between the US and its trade partners multiple times before final assembly.

 

Very True as to why NAFTA made sense and it shows the lack of business sense by Potus. Emotional idiot child, 

[balthazar]

Move to domestically built products with cheaper pricetags

huh.

[riviera74]

This could have worked in 1980.  The problem is is that too much has changed and a LOT of parts come from a lot of places.  Protectionism is bad policy, regardless of industry period.  Autarky is very bad policy period.  Too bad our president does not understand this at all.  Our president has been anti-free trade for more than thirty years and this is what we get from him.  Too bad our Congress refuses to take back those arbitrary tariff policies via legislation NOW.  This bad policy needs to be rescinded immediately, regardless of his protectionist instincts and those of his political base.

[balthazar]

EVERY country has tariffs on some goods. So it's global 'protectionism'... or its not. So it's 'bad'... or it's not.

What's definitely bad for business is a vastly unequal playing field (regardless of where the chips fall).

[smk4565]

Losing 1-2 million sales is not a way to create jobs or strengthen the middle class, it is just bad and outdated thinking to tariff things.

If they did put a 25% tariff on Chinese made cars, then the Buick Envision would cost more than th Enclave and XT5, which would make that vehicle dead in the water.  The whole idea is just stupid.

[daves87rs]

Dude knows nothing about the auto industry...and this is a bad idea.

I've been looking at GM or Ford, and the tariffs are even going to effect them.

Many people like myself might just skip new all together.......

[balthazar]

• There are a number of reasons to skip buying new, and tariffs isn't the #1 reason by a long shot.

• "it's just bad & outdated thinking to tariff things" - you & I are 'tariffed' every single day of our lives. Everyone is numb to it by now.

• US has the world's highest GDP- EVERYONE wants to sell here. Many need to sell here.
So don't call it a 'tariff', call it a 'licensing fee' for foreign companies.

[William Maley]

14 hours ago, balthazar said:

huh.

I know, I was confused by the "Move to domestically built products with cheaper pricetags". Has he seen domestic products recently because they're somewhat similar to models that are imported.

Plus, a fair number of cars from domestic automakers are imported (from Canada and Mexico)

[balthazar]

7 minutes ago, William Maley said:

...domestic products recently because they're somewhat similar to models that are imported.

If so, and I don't at all disagree, why would the USDM lose 1-2 million unit sales? Doesn't quite seem logical.
 

Quote

...a fair number of cars from domestic automakers are imported...

Again: make it a licensing fee, not a parts or assembly plant location fee.

Edited June 13, 2018 by balthazar

[frogger]

What if China charges a licensing fee to sell cars in China, which is a much bigger car market than USA...  The auto market and GM sell more vehicles in China than USA..

 

 

 

 

 

Edited June 13, 2018 by frogger

[G. David Felt]

9 minutes ago, frogger said:

What if China charges a licensing fee to sell cars in China, which is a much bigger car market than USA...  The auto market and GM sell more vehicles in China than USA..

All good as long as the profits come home to the USA and not stored in some other place like Apple does with their trillions stored in Ireland.

[ccap41]

So if we lost ~10% of auto sales but increased the cash coming in, it works for the government. 

Lose 10% sales, increase 25% tariff. It sounds like a net win for government cash flow. 

[balthazar]

26 minutes ago, frogger said:

What if China charges a licensing fee to sell cars in China, which is a much bigger car market than USA...  The auto market and GM sell more vehicles in China than USA.

"What if?"

They already do; a 25% tariff on auto imports.

And it's not GM in China, it's SAIC, a joint venture, IE: effectively half of it is a Chinese company selling GM cars. So cut GM's Chinese volume there in half.

Edited June 13, 2018 by balthazar

[daves87rs]

22 hours ago, balthazar said:

• There are a number of reasons to skip buying new, and tariffs isn't the #1 reason by a long shot.

• "it's just bad & outdated thinking to tariff things" - you & I are 'tariffed' every single day of our lives. Everyone is numb to it by now.

• US has the world's highest GDP- EVERYONE wants to sell here. Many need to sell here.
So don't call it a 'tariff', call it a 'licensing fee' for foreign companies.

Yep...true.

But regardless it will increase prices....granted-it will raise used prices as well......