In the wake of President Donald Trump’s 25% tariff on imported automobiles and auto parts, the automotive industry faces significant changes. Kevin Tynan, Director of Research at The Presidio Group, joins Jim Fitzpatrick on Inside Automotive to provide an expert analysis of what this means for car dealers, manufacturers, and the broader market. From price hikes to shifting supply chains, Tynan breaks down how these tariffs will impact both the industry’s short- and long-term trends.
During today’s conversation, Tynan shared his insights into the potential impact of the 25% tariffs imposed on imported vehicles and auto parts. He emphasized two key outcomes: rising prices and a significant reshuffling of vehicle supply.
According to Tynan, even vehicles assembled in the U.S. will see price increases due to the higher cost of parts imported from overseas. For 2024, with around 16 million vehicles expected to be sold in the U.S., approximately 5 million vehicles will either be produced abroad or assembled in countries like Mexico or Canada. The fate of these 5 million units, whether they will be built or not, remains uncertain as tariffs take effect.
Tynan explained that while the tariffs will raise prices for consumers and introduce uncertainty for dealers, the overall profitability of manufacturers and dealers could remain strong. He then pointed to 2022, a year when only 13.8 million vehicles were sold, yet it became one of the most profitable years on record for both manufacturers and dealerships due to high margins driven by low supply and strong demand.
He also stressed that while fewer vehicles might be sold, dealers will be able to make up for this loss through other revenue streams like F&I, as well as service and repairs. Tynan believes these diversified revenue streams will help mitigate the impact of lower new vehicle sales. However, the used car market will also feel the squeeze as lower volumes of off-lease vehicles, combined with reduced new car supply, will lead to higher prices and increased competition among dealers for inventory.
On a broader scale, Tynan speculated that the tariffs could shift how manufacturers operate in the U.S., driving them to adjust their production capacities. While some manufacturers may face challenges, others could capitalize on this opportunity by ramping up U.S. production. The ultimate goal of these tariffs, Tynan explained, is not just to influence consumer prices but to boost U.S. manufacturing jobs and capacity utilization, with an eye toward a more self-reliant automotive industry.
In the short term, Tynan predicted dealers would need to get creative, navigating a market with fewer transactions but potentially higher margins. Dealers will need to be nimble, recognizing where the opportunities lie and adjusting to a landscape with fewer vehicles and a longer fleet turnover.
“Look, and I think two things we can pretty much be sure of. One is prices are going to be higher, right? Even the vehicles built final assembly in the U.S. and U.S. factories because no vehicle sold in the U.S. is 100% U.S.-made parts. So even though the supply chain and the value chain of that vehicle, there are parts that are going to face an additional increase in prices.” – Kevin Tynan
