Trump’s EV, Tariff Intentions Putting Auto Industry, Consumers On Edge

Auto dealers, manufacturers and customers are watching closely as Pres. Donald Trump threatens to pull the trigger on import tariffs that could add thousands to the cost of certain vehicles and signs executive orders on policies aimed at reducing production and demand for battery-electric vehicles.

Earlier this week, Trump said he will impose a 25% import tariff on goods coming in from Canada and Mexico effective February 1. His administration is also discussing duties on imports from China and European Union nations effective February 1, according to a Reuters report.

Possible tariff price implications

That date is barely a week away leaving little time for automakers to adjust production plans and dealers the opportunity to re-balance their inventories, observed Kevin Roberts, director of economic and market intelligence at online vehicle marketplace CarGurus.com.

The result, he said, could be consumers faced with inventories of the same imported models priced differently, depending on if they landed on lots before or after the tariffs were imposed.

“You could have one pre-tariff and one post tariff that could have wildly different prices,” said Roberts in an interview.

The price difference would have a profound effect on a customer’s buying decision, especially in the case of full-size pickup trucks that already carry high sticker prices.

“If you're say, looking at a half-ton pickup truck, and you have one that's being produced in Canada or Mexico that has a 25% tariff, or one that is produced in America without it, that could be a deciding factor in what vehicle you want to go for,” said Roberts.

But a CarGurus study reveals the average list price of U.S.-made vehicles is $53,500, already higher than most imported cars and trucks due to higher costs and product mix.

The chart below shows how the average list price of vehicles imported from Canada and Mexico would increase with 10% and 25% tariffs. Even with a 25% tariff, the highest average list price of a vehicle coming in from those countries would top out at $52,000, according to the CarGurus report.

That’s a difference, however, that could affect buying decisions.

It’s important to keep in mind tariffs would also affect imported parts and components, further adding costs to the consumer.

“Mexico produces 16% of all vehicles sold in the U.S., while Canada accounts for 7%,” wrote Brian Finkelmeyer, senior director of enterprise insights and advisory at Cox Automotive in a report. “Not to mention the $200 billion of auto parts made in Mexico and shipped to U.S. assembly plants and repair facilities. A potential 25% tariff would add $50 billion of incremental parts cost from Mexico. These costs would make their way to American consumers, resulting in higher prices.”

Automaker tariff risks differ

Not all makes and models, however, are at the same risk of having tariffs slapped on their products.

Jaguar-Land Rover, Mitsubishi and Volvo have the highest inventories of vehicles build outside North America, while Stellantis, Honda and Ford have the least, according to the CarGurus report.

Policies target EV growth

Price is certainly a consideration for many of those considering a battery-electric vehicle. The availability of up to $7,500 in federal tax credits for purchasing an EV provided enough financial relief for a great number of customers to make the leap.

But among other actions aimed at stalling the transition to EVs, Pres. Trump is considering ending those EV tax credits.

Should that happen, dealers may have to get creative to bring EV prices down enough to capture those on the fence.

At automotive retailing website TrueCar.com, which partners most automakers and about 9,000 individual dealerships and entities such as discounter Sam’s Club, Triple A and rideshare company Uber, it’s a case of coming up with alternatives to tax breaks.

“We have certain solutions to do that, both in terms of us working with the OEMs to get those EV incentives at a national level, targeted to our affinity network, but then also the dealer level, working with the dealers to say, listen, would you be willing to offer a special incentive on these EVs to Sam's Club members?” explained Jay Ku, TrueCar chief revenue officer, in an interview. “It’s not publicly available, but we can help move those units through channels we know are high for EV sales.”

One example Ku cites is TrueCar’s EV incentive program for Uber drivers. As the rideshare’s EV sales partner TrueCar offers $1,000 checks to drivers who buy a new or used EV through the platform and take 100 trips, according to Ku.

EV sales surged in December to a 2024 monthly retail market share high of 10.5% according to J.D. Power, but overall sales remain below industry targets increasing just 0.7% last year over 2023.

The mini year-end surge may be attributed to a rush by customers aware of Trump’s intentions to kill tax credits.

“It’s notable that December’s average transaction price for battery electric vehicles was $45,700, while hybrids and gas-powered vehicles combined for an average transaction price of $46,500,” wrote Elizabeth Krear, vice president of the electric vehicle practice at J.D. Power, in a report released Thursday, “BEVs, inclusive of federal tax incentives, transacted $800 less than non-BEVs in December. These dynamics indicate that more shoppers are making EV decisions based on EV availability and pricing, knowing that the industry may be losing the federal incentive.”

But TrueCar’s Ku doesn’t buy that, asserting the purchase of an EV is such a life-changing decision, it’s not one made on impulse.

“I don't think it necessarily was bringing new people into the category, per se,” said Ku. “I think it was just people like, well, I was thinking of getting one anyways, and so I should just do it now before it's gone. I think it just kind of pushed people over the edge and added an accelerant.”

Then there’s Trump’s revocation of former Pres. Joe Biden’s non-binding executive order setting a target of EVs accounting for 50% of all vehicle sales by 2030 and ordering a freeze on unspent funds for growing the nation’s recharging infrastructure.

It’s the latter move CarGurus’s Roberts cites as possibly having the biggest effect on EV adoption but may also be a reflection of its overall sluggishness.

“People need to charge them, and so any kind of disruption in the build out of the charging infrastructure could have kind of a more longer-term impact there,” cited Roberts. But I also keep in mind that Tesla, which has probably the most robust charging network already out there in the marketplace, was already starting to pull back on their Supercharger network as well.”

So between the threat of import tariffs, the loss of tax incentives and federal spending on an EV charging infrastructure, the intended policies of the second Trump administration promise to throw the auto industry and its customers into key quandaries that may production, technology, sales and revenues for the remainder of the decade and beyond.