Car prices to rise due to tariffs and certain vehicles possibly ...

[edyvw]

Dang, your comments hit a lot of nerves for us older guys, but in reality you are stating nothing that we don't already know.

I wonder what caused us, as a country, to move towards an entitled lifestyle? Our gasoline is pitifully cheap and yet we complain (less than 1978, inflation adjusted). Bigger, more luxurious everything is the norm - houses, cars, you name it. Remember when Formica was the standard counter top? Our phones, television, heated car seats. I could go on and on.

Is it our (consumer) fault? Industry/corporations pushing cheap? Corporate greed? Greed in general? Laziness? Any answers from you all???????

I see the current situation as simply a much needed readjustment. Look back at history and our big market adjustments have always been painful. I experienced it the worst during the early 1980's recession (a whopper in Michigan). Sold our house and moved down state to keep my career and family intact. We survived. I am grateful for what I have.

The problem is that is not how it is working. It is wishful thinking.
Also, all the stories about globalization, NAFTA etc. are overblown because people want to be victims.
But, what happened with globalization? Take I85 corridor from Montgomery, AL to Atlanta, GA. Before 2005, there was nothing between those two cities except the Auburn campus and textile, low-paying jobs. Now, it is littered with Hyundai/KIA suppliers because Hyundai is in Montgomery, while the KIA plant is in La Grange, GA.
People pretend like we just lost everything and did not gain anything.
But bigger issue in all this is that we are dismantling post WWII system where the US was main player setting up rules. And if you think we don't profit, gain something out of it, oh boy, just wait alternative.

 

[Silverado12]

Dang, your comments hit a lot of nerves for us older guys, but in reality you are stating nothing that we don't already know.

I wonder what caused us, as a country, to move towards an entitled lifestyle? Our gasoline is pitifully cheap and yet we complain (less than 1978, inflation adjusted). Bigger, more luxurious everything is the norm - houses, cars, you name it. Remember when Formica was the standard counter top? Our phones, television, heated car seats. I could go on and on.

Is it our (consumer) fault? Industry/corporations pushing cheap? Corporate greed? Greed in general? Laziness? Any answers from you all???????

I see the current situation as simply a much needed readjustment. Look back at history and our big market adjustments have always been painful. I experienced it the worst during the early 1980's recession (a whopper in Michigan). Sold our house and moved down state to keep my career and family intact. We survived. I am grateful for what I have.

The recession in the early '80s was the beginning of the end in the rust belt. I grew up in Morgantown, WV and moved down to VA in 1987. I always buy union made products if I can and cars from the USA or Canada.

 

[scoot]

If there is one thing certain nothing stays the same .

 

[edyvw]

Hmm that is a lot of foreign assembled cars on that list, however i do notice those are not the most popular cars either. Still domestic made cars dominate the marked, so i suppose those will not get any tariffs.

All cars are going to be more expensive for two reasons:
1. The average car part necessary for assembly makes 5 border crossings during development. Many have final production in MEX or CAN. So, tariffs will be paid on them.
2. If one car manufacturer raises prices, others will too, regardless of whether they need to. Why not? If the Toyota Grand Highlander now goes up $4000, but Honda does not need to raise price of the Pilot, they will still hike it up $2,000 as they are still cheaper but make more money.

 

[eljefino]

I don't think much needs to be rolled back. $20K in Jan of 2020 is about $25K now. Can't blame auto OEM's for that. If you go to just about any manufacturer's website they have a reasonable car or small SUV "starting at" around $25K. Problem is, by the time they get to the lot there $32K.

Maybe now, we will actually see some $25K cars available to actually buy. I don't need 19 inch wheels and whatever other junk they wish to force me into.

You only get the base models when the loaded ones aren't selling and they need to keep the factories running, either to meet a CAFE goal or because of some contract stipulation.

There was a shortage of trucks during Covid, so they simply stopped making stripped models. They kept selling, because buyers said "YOLO."

It takes an actual recession to cause lower trim levels to actually appear and sell. Iacocca figured this out with the K-car, and ensured stripped models "with seating for six Americans" were actually in dealers during the early 1980s. VW of America sold a "Jetta Base" that wasn't in the printed brochures, and had no AC, more recently.

I do not wish it on the country to have an economic situation that forces this to happen. I do wish people lived within their means so the only loan they'd qualify for would be for a reasonable vehicle, but I'm not a bank regulator.

 

[PWMDMD]

All cars are going to be more expensive for two reasons:
1. The average car part necessary for assembly makes 5 border crossings during development. Many have final production in MEX or CAN. So, tariffs will be paid on them.
2. If one car manufacturer raises prices, others will too, regardless of whether they need to. Why not? If the Toyota Grand Highlander now goes up $4000, but Honda does not need to raise price of the Pilot, they will still hike it up $2,000 as they are still cheaper but make more money.

BINGO! If we were talking about 3-5% tariffs ok. But we are not, they are very significant and they will result in a significant price difference between US-made and imported vehicles. Even if the American car companies don't have to raise prices as much as tariffs add to imports, you can be sure they're going to still increase their prices to sit just below import vehicle prices. The net effect will still be all of us paying higher prices across all companies regardless of where they are made.

 

[PandaBear]

Oh no! That means Karen may not get a new Tahoe Z71 to haul her two kids and bad attitude around the burbs. And Ken may not get a new Platinum F150 to haul around his golf clubs and beer belly.

Now their other middle age friends won’t think they are cool anymore. What is this country coming to?!?!

In an economy, one person's lifestyle expense is another person's income to feed a family. In the end the market will balance it out. One person's debt payment is another person's retirement income. The market will also balance that out. Nobody points a gun at someone to buy a $70K SUV, and nobody points a gun at someone telling them not to make it. There is no point praising someone in the factory working hard making $70K SUV and demonizing someone else buying them. If the prices change they won't be made, sold, purchased, and financed.

We will see how things turn out in a few months. My bet is that $70K vehicle will still be around, it will just go from a fully loaded one to a base model, and from a luxury purchase to a necessity.

 

[JeffKeryk]

Since the CEO is anti-union (among other things) and I can't use an E-car (but probably consider it eventually) Tesla isn't on my list although I like the Model 3.

I don't know the numbers, but I understand the compensation package is at least comparable to the union equivalent.
Tesla employs 25K workers at the Fremont plant, and thousands more in support.

They are always hiring. Not everyone can be a lowly programmer like me.

 

[JeffKeryk]

All cars are going to be more expensive for two reasons:
1. The average car part necessary for assembly makes 5 border crossings during development. Many have final production in MEX or CAN. So, tariffs will be paid on them.
2. If one car manufacturer raises prices, others will too, regardless of whether they need to. Why not? If the Toyota Grand Highlander now goes up $4000, but Honda does not need to raise price of the Pilot, they will still hike it up $2,000 as they are still cheaper but make more money.

I wish people understood #2. There is no magic; quite the opposite.
If there were 3 similar houses on the block and 2 were priced at $500K would you sell your's for $100K less?
Econ teaches us prices will tend to rise until consumption falls to an unacceptable level.

What happens when the tariffs go away? I seriously doubt business will risk funding huge new endeavours with such uncertainty. Add to that the increased start up costs (tariffs), labor, materials, energy, you name it. The barriers to entry are high, more so in high tech or capital equipment. I guess they could make some mousetraps or Walmart cheapo stuff?

 

[edyvw]

BINGO! If we were talking about 3-5% tariffs ok. But we are not, they are very significant and they will result in a significant price difference between US-made and imported vehicles. Even if the American car companies don't have to raise prices as much as tariffs add to imports, you can be sure they're going to still increase their prices to sit just below import vehicle prices. The net effect will still be all of us paying higher prices across all companies regardless of where they are made.

But American car companies make vehicles in CAN and MEX, and those that they don’t, bunch if parts are made there.
Bunch of Canadian suppliers are in Michigan. They supply all Big 3. They supply Dodge to make Chargers that are made in Canada. So Canadian supplier have production in Michigan and then export parts to Canada. Those parts will have tariffs on, same as Chargers imported to the US.
People are oblivious to how connected these three economies are.

 

[ATex7239]

In an economy, one person's lifestyle expense is another person's income to feed a family. In the end the market will balance it out. One person's debt payment is another person's retirement income. The market will also balance that out. Nobody points a gun at someone to buy a $70K SUV, and nobody points a gun at someone telling them not to make it. There is no point praising someone in the factory working hard making $70K SUV and demonizing someone else buying them. If the prices change they won't be made, sold, purchased, and financed.

We will see how things turn out in a few months. My bet is that $70K vehicle will still be around, it will just go from a fully loaded one to a base model, and from a luxury purchase to a necessity.

Adapt or perish. That goes for manufacturers and consumers alike.

 

[PWMDMD]

But American car companies make vehicles in CAN and MEX, and those that they don’t, bunch if parts are made there.
Bunch of Canadian suppliers are in Michigan. They supply all Big 3. They supply Dodge to make Chargers that are made in Canada. So Canadian supplier have production in Michigan and then export parts to Canada. Those parts will have tariffs on, same as Chargers imported to the US.
People are oblivious to how connected these three economies are.

I get that. My point is even if they change their supply chains to really take advantage of the tariffs, they will still use the tariffs to raise prices and regardless of where the car is finally assembled, and we will all pay more for all cars for multiple reasons.

 

[PWMDMD]

Unfortunately that is the world we live in today though. What’s the alternative? Quit working and crawl into a hole in the ground to die?

The alternative? I keep my vehicles as long as possible and buy as little as possible to spend as little as possible of my hard earned money until the adults show up again. Tariffs are a consumption tax and a disincentive to spend money, so consider me disincentivized!

 

[edyvw]

Also, talking about adding salt to the insurance wound.

 

[BMWTurboDzl]

I thought the premise was increase import taxes/tarrifs and subsequently decrease the income tax. I think folks are forgetting that. Figure I saw was an average of $2100 increase in costs to an average household based on these new tarrifs. For me, no cares and if I can get 2x that reduced in income taxes reduction, cool. If you are poor, well, this isn't great for you b/c unless there is an offseting refundable tax credit (you get the money back but didn't pay it in) for lower income folks, it's a bigger deal than just Karen and her Z71. I'm going to put my annual money in my SEP IRA this week (great timing!) before 4/15 tax day and I own all my vehicles so whatever. Time to buy some TP bottled water and ammo Ok, time to go out and fiddle with my VWs and take pictures of oil filters.

That's the allegation but it is crickets when someone asks what happens when tariff receipts invariably drop because consumers choose domestic goods.

My wife has a coworker who's bought a Toyota for her 15 yr old rather than wait until November.

 

[SC Maintenance]

The problem is that is not how it is working. It is wishful thinking.
Also, all the stories about globalization, NAFTA etc. are overblown because people want to be victims.
But, what happened with globalization? Take I85 corridor from Montgomery, AL to Atlanta, GA. Before 2005, there was nothing between those two cities except the Auburn campus and textile, low-paying jobs. Now, it is littered with Hyundai/KIA suppliers because Hyundai is in Montgomery, while the KIA plant is in La Grange, GA.
People pretend like we just lost everything and did not gain anything.
But bigger issue in all this is that we are dismantling post WWII system where the US was main player setting up rules. And if you think we don't profit, gain something out of it, oh boy, just wait alternative.

The Kia factory in GA and Hyundai factory in AL are there ONLY because of the chicken "tax", which is a 25% tarrif that has existed since WW2. Look it up.

They build SUV's in those plants - to avoid the tariff on light "trucks" and vans.

Same reason BMW builds the "X" series in SC. Same reason Toyota builds pickups in Mexico - who was exempt from the chicken tax due to Nafta or whatever its called now.

All those companies import sedans, etc. - although in some cases they also make sedans in the same plant, but the plant would not be there not for the chicken tax.

Fun fact - the two BMW assembly lines in SC are flex lines. They could make 3 and 5 series Sedans here without much trouble if they want.

 

[edyvw]

The Kia factory in GA and Hyundai factory in AL are there ONLY because of the chicken "tax", which is a 25% tarrif that has existed since WW2. Look it up.

They build SUV's in those plants - to avoid the tariff on light "trucks" and vans.

Same reason BMW builds the "X" series in SC. Same reason Toyota builds pickups in Mexico - who was exempt from the chicken tax due to Nafta or whatever its called now.

All those companies import sedans, etc.

Primary product of Hyundai Montgomery was Sonata, long before this SUV trend.

 

[JeffKeryk]

Tesla took 17 years, from its founding in 2003, to achieve its first full-year profit in 2020. Silicon Valley was the location of choice with its engineering talent. This talent is in short supply across America. You know, that education thing...

Yeah, that was a big endeavour, but it is a data point. Many people, including me, doubted Tesla's viability to one degree or another; many good BITOGers still doubt them.

Approximately 20% of new businesses fail within their first year, 50% fail within five years, and 65% fail within ten years, according to the Bureau of Labor Statistics.

We live and do business in a world economy. You think it can be transformed in a few years? Where does the capital for all this come from?
Target tariffs for specific markets and products is one thing.

 

[SC Maintenance]

Primary product of Hyundai Montgomery was Sonata, long before this SUV trend.

It opened in 2005, and they were building Sante Fe in 2007. Sante fe was specific designed for USA market. They started making other vehicles first - smooth out operations and continued to do so. Its normal for plants to make multiple models - but it was put here pretty specifically to avoid that tax.

Toyota plant in Mississippi was supposed to make Highlander, but they started in 2007 and after the GFC switched to Corrolla - which has continued. Plans change I guess.

Nissan Smyrna plant originally started making Nissan pickup. They have made many other vehicles there always including altima and maxima. I think they currently make 4 models - Rogue, Pathfinder, Altima, Maxima and one something??

BMW started making Z series and 3 series cars but it was quite a small plant back then. When BMW decided to make SUV's they greatly expanded the plant - well really 2 plants now - its now BMW's largest and only makes SUV's currently.

If you ship a SUV / truck / Van into USA there is 25% tarriff - has been since ww2. Nafta was excluded. I think Canada has had a special deal forever - well till monday.

Ford with "transit connect" would put seats in them, ship them into USA and call it passenger car to get through customs, then remove the seats and sell as commercial. They got fined $365M. https://www.justice.gov/archives/opa/pr/ford-motor-company-agrees-pay-365m-settle-customs-civil-penalty-claims-relating#:~:text=Ford Motor Company has agreed,the Justice Department announced today.

 

[shortyb]

Forget the new Audi A5 Cabrio I was going to buy my wife this year - too bad there aren't any actual American made sport sedans anymore that we'd want to own. I'll just hunker down and wait for the dust to settle like usual.

Skip the Audi and head for the Cadillac dealer. Ask for a CT5-V Blackwing. You'll be VERY happy. Promise.