Those of you counting down the days for the arrival of the new Kia K4 or the new Hyundai Palisade may end up disappointed, as analysts are estimating that more than 1.55 million fewer vehicles could be built globally in 2025. Automotive production in the United States is also expected to take a dramatic hit amidst the fallout of the Trump administration’s auto tariffs.
Related
Automakers That Will Be Impacted By President Trump’s Tariff Against Mexico And Canada
With impending 25% tariffs against goods manufactured in the USA’s neighboring states, these are the automakers that would be most impacted.
Analysts from S&P Global Mobility suggest that up to 87.91 million new vehicles could be produced by the end of 2025, a 2 percent drop over the previous year, and marking the second year in a row that vehicular production has dipped. Tellingly, and according to further analysis from Nikkei Asia, North American car production could fall by as much as 9 percent, with the latter claiming the expected drop in U.S. car sales could be at a level not seen since the COVID-19 pandemic struck in early 2020.
Why Trump’s Tariffs Could Lead To U.S. Car Sales Plummeting
Much of the blame is being laid at the door of the Trump administration’s auto tariffs, which placed a 25-percent tax on all non-U.S.-made vehicles and auto parts being imported back in early April. Unsurprisingly, several European and Japanese manufacturers, including Aston Martin, Audi, Bentley, Land Rover, and Polestar – most of which do not produce any vehicles in the United States – have started limiting their U.S. imports, relying instead on existing U.S. stock. That 1.55 million, for example, surpasses the 1.4 million vehicles that Japan alone annually exports to North America.
The U.S. government’s goal of increasing domestic production comes with its own problems. Though brands like Volvo, Honda, Mercedes-Benz, and Nissan have agreed either to increase production in the U.S. or build new North American facilities (Nissan recently confirmed U.S. production of the Rogue), the results from either will still take “some years” to come to fruition.
Related
Canada Strikes Back Against American-Made Cars With Tariffs Of Its Own
Canada fires back with matching tariffs on US-built vehicles.
Moreover, up to half of the completed vehicles currently sold in the U.S. are imports, while the models produced in the U.S. (the States’ annual production figure is second only to China) rely on up to 60 percent of imported parts. Recent mitigation measures reducing taxes on steel and aluminum provide a much-needed cushion, but tariffs and higher labor costs, ironically, could see U.S.-built vehicles costing more than imported models.
A Drop In Sales Could Lead To More Lay-Offs
S&P Global’s analysis goes further, suggesting that U.S. sales, in line with a drop in North American production, could fall by 3 percent this year. Diminished sales could lead to yet further reduced exports to the U.S., production cuts by manufacturers, and thus mass layoffs. In early April, for example, shortly after the tariffs came into effect, Stellantis announced that 900 U.S. workers would be temporarily laid off across five of its U.S. facilities, while production would halt at two of its plants in Canada and Mexico. Admittedly, a 14 percent drop in sales year-on-year in Q1 was a contributory factor.
CarBuzz, its writers, editors, and owners have no affiliation with any political entity or party. The CarBuzz team comprises members with a variety of differing political and social views. This article does not support either side of the current political landscape and serves only to collate the various developments therein to discuss their potential ramifications on the auto industry.
Source: Nikkei Asia
#U.S #Car #Market #Facing #Biggest #Slump #COVID
