Price Hikes, Layoffs, and Production Shifts: The "25% Tariff" Is Reshaping the US Auto Industry

According to Xinhua News Agency, the 25% tariff on imported cars announced by US President Trump officially took effect on April 3.

In response, US automakers are adopting various strategies to cope with this uncertainty, including adjusting pricing, incentives, and production plans.

Deutsche Bank analyst Edison Yu noted in a report released this week that automakers' responses vary. Ford plans to raise new car prices next month, Tesla reportedly suspended the import of parts for the CyberCab and Semi projects and halted overseas sales of the Model X and S produced in the US, and Volvo's truck factory is expected to lay off workers.

Deutsche Bank expects strong car demand in the US at the beginning of the year as consumers rush to purchase cars before prices rise, followed by a slowdown in H2 due to tariff impacts. US car sales are projected to drop to 15.4 million units in 2025, down from 16 million units in 2024.

Major automakers' responses vary, with divergence intensifying.

Although the Trump administration hinted at possible relief measures, specific details remain unclear.

Deutsche Bank currently assumes that all imported cars, except those compliant with the USMCA rules, will face a 25% tariff until customs fully assess non-US-made parts. Imported parts are expected to be affected by tariffs starting May 3. This has created significant uncertainty for automakers.

Deutsche Bank stated that automakers' responses differ. For example, Tesla suspended overseas sales of the Model X and S produced in the US, and General Motors halted operations at its CAMI assembly plant.

Mazda, Mitsubishi, and Subaru have also taken various measures, including absorbing price increases and even completely halting shipments of US inventory.

Ford is offering extensive employee price discounts and shifting production to its Fort Wayne plant. Honda publicly stated that it will not raise consumer prices while evaluating its response. Infiniti has indefinitely suspended production of two crossover models produced in Mexico. Rivian and several other EV manufacturers have maintained operations so far but are assessing longer-term impacts.

Some automakers are temporarily absorbing tariff costs, such as Mazda, which will continue until April. However, others are preparing to pass the costs on to consumers. Deutsche Bank noted that, despite the lack of large-scale public announcements, "the cost impact will not be negligible."

Industry Outlook: 2025 Sales May Decline

Earlier this month, Deutsche Bank remained cautious on auto stocks.

In a report, Deutsche Bank stated that as Q1 2025 earnings are released, automakers still face significant uncertainty due to new tariffs. They expect strong demand at the beginning of the year as consumers rush to purchase cars before prices rise, followed by a slowdown in H2 due to tariff impacts. US car sales are projected to drop to 15.4 million units in 2025, down from 16 million units in 2024.

Deutsche Bank's report indicated that Ford and General Motors' gross costs could increase by over $10 billion, while Tesla and Rivian are relatively less affected due to their supply chain characteristics.