The tariffs announced by Donald Trump are feeling scary for those who are looking to purchase a vehicle in 2025. The panic is bringing some to make rash decisions, but some experts are disagreeing that the market cannot sustain higher prices for vehicles and are looking at the secondhand car market to potentially fill the gap, just like what happened during the pandemic and post-pandemic shortages.
How will tariffs affect the industry?
One of the experts that have given their opinion is Yossi Levi, Car Dealership Guy Founder & CEO, who joined the panel at Fast Money. One of the points raised during the show was that consumers are still paying these higher prices that we saw post pandemic, but absorbing another hit might be too much for them.
When asked about this, Levi stated “Different automakers are in different positions, so reactions vary. The dealers who work with German brands? They’re feeling the pressure. But if you look at domestic brands or even Japanese and Korean manufacturers, the vibe is way more relaxed. They’ve been through wild swings in the past couple of years—this is just another bump in the road. They know the manufacturers will make adjustments, maybe run extra shifts, and keep things moving. There are definitely some nervous dealers in certain pockets, but overall, no one’s in panic mode.”
The reason why reactions are so varied is because there are many automakers who despite being foreign have some factories here in the US, which produce cars that would not be affected by the tariffs. One such example is German Automaker BMW, which makes their X5 model in South Carolina. However, their 3 Series and 5 Series are made in Germany, which means that they would be subject to an increase in price. At the end of the day, companies could chose to deal with this in different ways, but as Levi explains “Manufacturers don’t want to lose market share”
He continued explaining some of the ways manufacturers are figting the tariffs “Look at BMW—they sent out a memo saying they’d price protect dealers until May 1st. That tells you they’re trying to keep things steady rather than just jacking up prices. On the other hand, Ferrari—totally different market, obviously—raised prices by about 10%. But here’s what’s interesting: BMW’s price increase? Only about 4%. No one’s making drastic moves like a 25% hike because they’re all waiting to see what their competitors do. Everyone’s taking baby steps right now.”
What this effectively means for consumers is that manufacturers are willing to absorb some of the costs, at least initially, to ensure that their companies stay relevant in the market, but this absorption is not likely to last forever. As Levi posits, “I think it’s a day-by-day situation. There’s no consensus—manufacturers and dealers are reacting to the news in real-time. But dealers aren’t in full-blown panic mode because they know automakers have some extra capacity to work with. If things go south, they can spread the impact over time instead of just dropping it all at once.”
It will also depend on the ability of companies to speed up or move production, as they are all such varied companies with such different demographics and market shares. Luxury companies will likely be more comfortable having their customers pay the increase, while economy brands will have to work within the system to ensure that their customers are not priced out.
Levi finished his interview giving his honest take on how the industry as a whole will move “Some brands will eat the costs for now, some will pass a little on to consumers, and others will split it down the middle. But here’s an interesting stat—if you look at how many weeks of income it takes to buy a car today, it’s actually about four weeks fewer than it was a year or two ago. It doesn’t feel like it, since prices are still high—around $48,000 on average—but the data shows that people technically have more buying power now than they did a couple of years back. So, can consumers handle more price increases? Probably. But will automakers push everything onto them? I doubt it. BMW’s approach—small, cautious increases—might be the blueprint moving forward.”
