President Donald Trump’s aggressive auto tariffs strategy is taking a direct hit on the industry’s bottom line.
Following the close of the June quarter, public disclosures from the largest automakers put the combined tariff impact at around $11.7 billion.
The losses aren’t confined to foreign brands — every major manufacturer with US operations is affected.
Who’s been hit hardest so far:
- Toyota (TM): $3 billion wiped from fiscal Q1 operating income.
- Volkswagen (VWAGY): Significant multi-billion-dollar tariff charges across its US-bound product lineup.
- General Motors (GM): Material cost increases from parts and vehicles sourced in Mexico and Canada.
- Ford (F): Tariff-related pressures on trucks and imported components.
- Honda (HMC): Margin pressure on imports from Japan and Canadian plants.
- Tesla (TSLA): ~$300 million hit in Q2, mostly from EV battery imports.
The Tariff Structure Squeezing Automakers
The industry is dealing with a multi-layered tariff environment:
- 15% duties on Japanese-built vehicles (affecting Toyota, Honda, Nissan, etc.)
- 25% sector-wide auto tariffs targeting Canada and Mexico — a blow to both foreign automakers and the US “Big Three.”
- Part-specific tariffs on high-value imports like EV batteries, electronics, and drivetrains.
This structure means even US-based production isn’t immune. Tesla, for example, manufactures all vehicles domestically but imports LFP batteries from China, triggering heavy duties.
Tesla’s Case: A Domestic Producer Still Hit Hard
CFO Vaibhav Taneja says tariffs added $300 million in costs last quarter, with two-thirds tied to automotive.
VP of Engineering Lars Moravy confirmed Tesla’s first US LFP battery factory will come online by year-end to reduce exposure.
Despite onshoring moves, Tesla expects full tariff impact in upcoming quarters due to manufacturing lead times.
Why Moving Production Isn’t a Quick Fix
Relocating vehicle assembly is capital-intensive and slow:
- New US assembly plant: 3–5 years, $1–2 billion.
- Retooling an existing facility: ~$500 million.
“Investment for new assembly plants is considerable and requires a larger rationale than a one-term presidential administration,”
— Sam Fiorani, AutoForecast Solutions
This means automakers must weigh the three-year cost of tariffs against the decade-long ROI of a new factory.
Company Responses: Strategic Shifts Underway
General Motors (GM)
- Committing $4 billion to expand US production.
- Bringing gas-powered Chevrolet Blazer and Equinox production from Mexico to US plants by 2027.
- Moving full-size SUV (Chevrolet Tahoe) and light-duty pickup (Silverado) output to Orion, Michigan.
- Reallocating EV production from Orion to Factory Zero (dedicated EV plant).
Honda (HMC)
- Considering adding a third production shift at US facilities to offset tariffs.
- Denied reports of moving Civic sedan production from Canada, but exploring shifts in model production to reduce tariff exposure.
- Analysts warn Honda’s margins will remain deeply negative due to structural EV costs and tariffs.
Ford (F)
- Initially absorbed tariffs via “employee pricing for all” promotions to clear pre-tariff inventory.
- Now raising prices on key models like the Mexican-built Maverick pickup.
- Using reduced incentives and higher finance costs to protect margins.
Toyota (TM)
- Largest single-company hit at $3B in Q1.
- Working to balance Japanese production with increased US output without sacrificing efficiency.
Why Not Just Move Everything to the US?
Analysts point out that production location decisions are complex:
- High-volume, low-margin models (e.g., Nissan Rogue) already built in the US to avoid import costs.
- Low-volume, high-margin luxury models often stay abroad — moving them could erode profitability.
- Supply chains for specialized parts (e.g., EV drivetrains, luxury interiors) are deeply integrated internationally and expensive to replicate.
Consumer Impact: Price Rises Are Coming
The inevitable outcome, say analysts, is higher prices for buyers across all vehicle segments:
- Short term: Automakers absorbed much of the cost in Q2 — visible in earnings reports.
- From fall 2025: Price hikes will become more common, especially on imported and tariff-exposed models.
- 2026 outlook: Rising prices across both imported and domestically made vehicles as production costs and tariffs continue.
“Everyone will pay more,”
— Sam Fiorani, AutoForecast Solutions
CFRA’s Garrett Nelson adds that even with onshoring, product cuts, and cost optimization, automakers will still need to absorb a large portion of tariff costs — and pass some of the rest to consumers.
The $11.7 billion tariff bill is only the beginning. Without policy changes, automakers face a multi-year squeeze that will reshape supply chains, raise vehicle prices, and test profitability, especially as they also juggle costly EV transitions.
Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.
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