NextFin news, On Friday, September 19, 2025, major US automakers General Motors and Ford disclosed they are incurring substantial costs due to tariffs imposed earlier this year, with GM facing up to $5 billion and Ford $3 billion in gross tariff-related expenses. These tariffs, introduced in April 2025 under the administration of former President Donald Trump, have significantly increased the cost of manufacturing and importing vehicles.
Despite these added expenses, automakers have largely absorbed the costs rather than passing them directly to consumers. From mid-March to mid-August 2025, the average manufacturer's suggested retail price (MSRP) for new vehicles in the US rose less than 1%, according to data from car-shopping site Edmunds. The modest price increase of 3.3% for 2026 model-year vehicles aligns with historical averages, reflecting automakers' efforts to maintain affordability amid a competitive market.
Industry analysts and executives attribute this restraint to concerns that higher prices could deter buyers, especially after a 30% rise in average transaction prices since 2019. The current average new car price stands at approximately $49,870, according to Automotive News, limiting the scope for further immediate price hikes without risking sales volume.
Automakers have employed various strategies to mitigate tariff impacts, including negotiating with suppliers and dealers to share costs. Some have subtly passed on expenses through increased destination fees, which rose 8.5% for the 2025 model year to $1,507, a significant jump compared to previous years.
Hyundai North America reported tariff costs eroding its bottom line by about $600 million in the second quarter of 2025 but has maintained competitive pricing to avoid losing market share. Warren Browne, a consultant and former GM executive, estimated that tariff costs added nearly $2,300 per vehicle on an annualized basis as of June 2025.
Looking ahead, experts predict that as tariffs appear likely to remain in place, automakers will begin gradually raising prices, focusing on higher-margin models to protect profitability. This approach aims to balance the need to recoup costs while minimizing the risk of losing customers to competitors. Industry insiders expect these price adjustments to be incremental and spread over time to maintain market competitiveness.
Mike Manley, CEO of AutoNation, a large dealership chain, indicated in a July earnings call that automakers plan to keep pricing competitive on top models while implementing minor portfolio-wide adjustments. Scott Kunes, COO of a Midwest dealer group, echoed this sentiment, emphasizing the highly competitive landscape and the importance of market share.
The tariff-related cost pressures and the resulting pricing strategies underscore ongoing challenges in the US automotive industry as it navigates trade policy impacts, consumer affordability concerns, and competitive dynamics.
Sources: Reuters, Yahoo! Autos, Automotive News, Edmunds, Cox Automotive.
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