Nick Carrey and Nora Eckart
LONDON/DETRIT (Reuters) – Automakers with plenty of cars in dealer lots have the advantage of time as they hone their strategy to pass President Donald Trump’s 25% tariffs, but Toyota’s lean inventory will allow customers to rise faster.
Last week, Trump imposed a 25% obligation on foreign automobile imports. Analysts say they can add thousands of dollars to the car price and buyers will try to run around to dealers to beat inflation.
As of March 17, Toyota had a 32.7 day supply of vehicles, far below the industry average of 89 days, with just 20 of its popular RAV4 SUVs. According to automotive service provider Cox Automotive, which is far below its nine-day supply.
Toyota said it had no plans to raise US prices for now, and Cox executive analyst Erin Keating told her that Toyota could boost production at its Kentucky plant.
“But they’ll still be vulnerable due to mathematics,” she said.
The car before the customs duties became hot items.
In North Haven, Connecticut, Bob Thomas Ford, outside Hamden, has a sign declaring, “100 Customs Fords Available!”
According to Cox, Ford had a supply of 103.4 days as of mid-March, while Hyundai was 107.4 days.
The race certifies that it will slow any model and price surge in uncertain economies to acquire completed vehicles through US ports before duties are carried out on April 3rd.
For example, sources from major European automakers said they shipped as many high-end models throughout the Atlantic as possible prior to tariffs.
The Trump administration’s 25% tariff on some auto parts, including engines, transmissions, powertrain parts and electrical components, is slower for some analysts who estimate parts imported since midnight on April 3, but estimate that some analysts will end on completed vehicles later on April 3.
Price increases should continue soon.
Automotive analyst Mel Yu said imported auto parts account for 40% to 80% of US-made cars and 20% to 40% of retail prices.
“No matter where it’s made, car prices will rise,” he said. “The impact of parts tariffs will be pretty quick.”
Yu is consulting many automakers in ongoing consultations with US dealership groups about adding between 8% and 16% to the retail price of their vehicles.
These talks show that dealers lower advance profits on sales. In return, the automaker said it would lower sales targets for dealers to offer profitable bonuses, while simultaneously lowering interest rates, extending funding terms and converting consumers into an increase in monthly payments between 5% and 7%.
“Nearly 97% of US retail customers are funded or leased,” he said. “So it’s all about monthly payments.”
However, consumers will face a greater impact with higher car insurance premiums, as higher parts costs will be more expensive to repair.
Cox’s Keating said high monthly payments and premium hikes will push more US consumers into the second-hand car market and boost prices.
“it hurts”
Soon, automakers and dealers with many pre-tension cars will have several breathing chambers.
Jim Seabitt, owner of Village Ford in Dearborn, Michigan, has a 90-day supply of vehicle now to mitigate the impact.
Ford has fewer completed vehicles from Mexico and Canada than Detroit’s rivals General Motors and Stellantis, so higher auto parts prices are Seabit’s main concern.
“We’re fine in the short term,” he said. “If this lasts for a long time, it’s going to hurt the dealer.”
Most automakers refuse to comment on price increases except for luxury producers such as Bentley and Ferrari, except for passing additional costs.
Mercedes-Benz is raising US stock levels to preempt tariffs, executives told analysts over the phone Monday, according to an analyst’s memo.
When asked about the price, executives said the silos were not operated by the automaker, but that it would protect how competitors responded to tariffs, according to Bernstein’s research notes.
In a March report, economist Arthur Laffer wrote that manufacturers with low stocks “need to raise prices almost immediately to maintain profitability.”
“It will have a delayed but inevitable impact on others as manufacturers with larger inventory could temporarily slow price increases,” he added.
Toyota’s lean stock makes the issue of price hikes even more urgent.
The company is struggling to increase production of its popular hybrids, and Koji End, head of equity research at SBI Securities, said the automakers “may start moving towards increasing prices little by little from the beginning of May.”
“They have very low stock… not enough for a month, so everything sells out quickly,” Endo said.
Seiji Sugiura, an analyst at Tokai Tokyo Intelligence Laboratory, said the weak yen will allow Toyota to slow price increases and take market share from US rivals GM, Ford and Stellantis.
“But I don’t know how the Trump administration will interpret this,” Sugii said.
Beyond Toyota, individual models bring headaches for us and for foreign automakers.
According to Cox’s Keating, the company looks at five models (Honda CR-V, Chevy Trucks, Subaru Forester, Chevy Equinox and Honda HR-V), and is subject to tariff impacts, with an average supply of 51 days.
However, in an unpleasant rush, these models can be sold much faster.
“If it’s a fast selling car, and now there’s even more demand and it sells faster, supply will be adjusted downwards that day soon,” she said.
(Reporting by Nick Carrie of London, Nora Eckart of Detroit, Karea Hall, Victoria Waldersey of Berlin, Alessandro Parody of Gdansk, and Daniel Lowsink of Tokyo, Edited by Barbara Lewis)
