US tariffs on car imports: how will they affect the prices?

CGTN Europe

CGTN Europe spoke to Sam Fiorani, Vice President of Global Vehicle Forecasting at AutoForecast Solutions LLC.

Transcript

00:00Sam Fiorani is an automotive expert and industry analyst at Auto Forecast Solutions in the United States.

00:06Sam, welcome, good to see you. What's your take on Mr. Trump's 25% car tariffs?

00:13This is going to cost the industry billions of dollars and it's going to cost consumers a lot of money as well.

00:20When you add the tariff to these vehicles, entry-level vehicles will disappear

00:25because they won't make any financial sense to the manufacturers to make.

00:29A lot of those vehicles come from Mexico or South Korea and once you remove those vehicles,

00:33then we're going to see the average price of a vehicle which is already closing in on $50,000 today.

00:39It's going to easily crest $50,000 after this goes into effect.

00:44We're going to have fewer choices for consumers and just more expensive vehicles in the next few months and going forward for years.

00:52Let's just walk down that imaginary car lot then and give us an idea of the sticker price on the windscreen.

00:58What's it going to cost after this?

01:01Entry-level cars today in the United States start in the mid $20,000 range

01:06and we're going to see those vehicles quickly disappear because they just can't afford to be built

01:11and there's no point in selling them if they're being sold at a loss.

01:15So when we push those prices up, the entry-level vehicle will now be in the $30,000 to $35,000 range

01:22and pushing a lot of people out of the market and into the used market,

01:25which will increase the price of used cars going forward.

01:28So this is a problem for all buyers as they deal with what they had dealt with the semiconductor issue a few years ago

01:37when dealers didn't have enough vehicles and prices rose dramatically.

01:42How do foreign car companies swallow up 25% tariffs? Is it possible?

01:49In some cases they will have to, at least in the short term, because they have the plants,

01:54they have the production already lined up.

01:57But in the longer term, those vehicles will just be too expensive to build.

02:01If it's a luxury vehicle, you may be able to pass on most of that cost to the consumer

02:06and see a $7,000 or $8,000 or $9,000 raise in the price of a Mercedes S-Class, for example.

02:12But when you get to the lower vehicles, to the family vehicles like a Chevrolet Equinox that's built in Mexico,

02:19that price is going to have to be borne by the manufacturer in a lot of cases.

02:24Some of that money will go to the bottom line and the consumer will end up spending $2,000 or $3,000 or $4,000 more on that vehicle.

02:33What are folks saying in the car industry there?

02:35Do you sense that Mr. Trump might backtrack on this or is this the end of the road at 25%?

02:41He has stated that this is a permanent tariff.

02:44So if we were to take him at his word, this is going to affect car production for the rest of his tenure here.

02:51And it's going to add billions of dollars to cost to manufacturers as they open new plants

02:57and hundreds of millions of dollars to retool existing plants.

03:01It's going to be a devastating effect on manufacturing and these companies for years to come.

03:09And we can still see stock prices go even lower.

03:12Right now, they're only down a few percent, but we can potentially see that going even further down.

03:18Loads of people who work in the American car sector, though,

03:22on manufacturing lines and the old rust belt will be delighted by this, won't they?

03:26It's good news if you make cars or you want to make cars in the United States.

03:32In the end, it's not going to add that much production to the United States.

03:37We can likely see the level of sales and production in the United States go down.

03:44A few years ago, we crested $17 million for a few years,

03:47which was record levels for the industry for vehicle sales in the United States.

03:52We haven't been back to that level.

03:54And this year, we were planning on seeing about $15.4 million.

03:59This year, we have to turn that number down and next year even probably even lower.

04:05The end result will be a handful of new jobs for autoworkers,

04:10potentially some new ones for suppliers.

04:12But in the end, we're going to see lower volumes all around.

04:15Sam, good to talk to you. Thanks for that.

04:17Sam Fiorani, the automotive expert in the United States.

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