Trump's tariffs to add $2,000 to car prices
New tariffs introduced under former US President Donald Trump are expected to increase vehicle prices by nearly $2,000 each, according to a report by consultancy AlixPartners. The added cost is likely to be passed on to consumers, affecting both car affordability and future electric vehicle (EV) adoption in the United States.
AlixPartners estimates that the $30 billion cost burden from the tariffs will lead to about one million fewer vehicles sold over the next three years. However, it still projects total US auto sales to reach 17 million units by 2030.
Tariffs to impact consumers and sales
'These tariffs bring a big wall of cost,' said Mark Wakefield, global auto market lead at AlixPartners. 'We see consumers taking the majority of the hit.'
According to the firm, automakers are likely to absorb about 20 per cent of the tariff costs, passing on the remaining 80 per cent — or roughly $1,760 per vehicle — to customers. General Motors and Ford have already forecast a tariff impact of $5 billion and $2.5 billion, respectively, with plans to offset some of the burden through price adjustments.
Despite the anticipated short-term decline in vehicle sales, AlixPartners believes the effects will moderate over time as the US negotiates new trade agreements. The 25 per cent tariff on imported vehicles is expected to eventually reduce to 7.5 per cent on assembled cars and 5 per cent on parts.
'This tariff wall is not likely to last forever,' Wakefield said.
EV sales forecast slashed
The consultant also warned that the rollback of EV incentives — such as the $7,500 tax credit for battery electric vehicles — could significantly affect the US auto industry's transition to electric mobility.
'That will steer car buyers away from EVs,' Wakefield said, noting that many consumers will prioritise cost and continue purchasing petrol-powered vehicles.
AlixPartners has revised its 2030 EV forecast for the US sharply downward, predicting that battery electric vehicles will make up just 17 per cent of new car sales — a decline from its previous estimate of 31 per cent.
Internal combustion engine (ICE) vehicles are now projected to account for 50 per cent of US car sales by 2030, up from a prior estimate of one-third. Traditional hybrids are forecast to make up 27 per cent of the market, while plug-in hybrids and extended-range EVs are expected to account for only 6 per cent, compared to the earlier prediction of 10 per cent.
Wakefield added that the shift in policy direction could lead American automakers to rely more heavily on foreign platforms. 'It makes it much more likely that they end up licensing or joint venturing or otherwise using platforms and EV technologies from China,' he said.
In a remark highlighting the potential consequences of this trend, Wakefield concluded: 'They'll have the world's best V8 engines by 2028. They'll probably also have the world's only V8 engines by 2028.'
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