As the automotive industry braces for the effects of new tariffs, industry expert Steve Greenfield, founder and CEO of Automotive Ventures, joins us on the latest episode of Inside Automotive to break down what these changes mean for dealers, manufacturers, and consumers. Greenfield sheds light on how dealers might adapt to maintain profitability in an evolving market.
First, Greenfield mentions the ongoing volatility in vehicle pricing due to tariffs. He notes that while higher prices could boost dealer margins in the short term, the bigger concern is consumer behavior. With increased vehicle costs, buyers may hesitate, anticipating that tariffs could be reversed or that prices may drop, much like Tesla’s dramatic price cuts in previous years. This uncertainty could lead to a temporary slowdown in demand.
Kevin Tynan of Presidio Group recently argued that selling fewer cars at higher profit margins—like in 2022, when the SAAR hovered around 13 million—might not be bad for dealers. Greenfield acknowledged this but cautioned that if consumers perceive potential price drops, they might hold off on purchases, further disrupting the market.
Shifting to the used car sector, Greenfield predicted parallels to the COVID-era surge when used vehicle prices skyrocketed due to new car shortages. Rental companies like Hertz and Avis anticipate higher replacement costs, which may delay fleet deflecting, tighten inventory at auctions, and drive up prices. He suggests that proactive dealers are already stocking up on used cars, expecting demand to rise and margins to increase.
Another noteworthy challenge is the potential strain on F&I departments. With 80% or more of buyers financing their vehicles, higher MSRPs could lead to fewer add-ons like warranties and insurance, as consumers become more payment-conscious. Additionally, loan terms could extend to 84 months or beyond, further reshaping dealership financing strategies.
The discussion also explored the tariffs’ potential long-term impact on domestic manufacturing. Greenfield pointed to Hyundai’s recent $21 billion commitment to U.S. infrastructure as an early example of automakers responding to policy shifts. He suggested that if the tariffs achieve their intended goal, they could lead to more U.S.-based production, new manufacturing jobs, and significant industry investments. However, the key unknown is how long the tariffs will last and what level of concessions President Trump would consider sufficient to roll them back.
Lastly, Greenfield addressed the investment community’s response. While dealers remain financially strong, prolonged market pressure could push them to reevaluate vendor partnerships, cutting costs and prioritizing technologies that improve operational efficiency. AI-driven automation solutions, in particular, may gain traction as dealers seek ways to optimize staffing and expenses.
"Consumers might fear, ‘I’m going to pay $5,000 more for a Camry or an Equinox, and then next week, when the tariffs are removed, that car is going to be $5,000 cheaper.’ So why would I want to do that? I’m just going to wait this thing out.” – Steve Greenfield
