Welcome to post-Liberation Day, where corporate America is feeling the heavy-handed effects of tariffs on the market. Repercussions on the car market aren't great—and we're not just talking about stocks here. A very rocky future of automotive pricing is sending car makers and analysts into panic mode as they try to decode how tariffs will ultimately affect new car costs. Are you feeling liberated yet?
Welcome back to Critical Materials, your daily roundup for all things electric and tech in the automotive space. The auto industry is facing a grim future in the near term with analysts expecting a downturn in sales and an uptick in vehicle pricing. Plus, the biggest brands are still trying to figure out what their final duty fees will be, and New York City looks to sue Tesla because Elon Musk "has clearly abandoned Tesla in favor of DOGE and President Trump’s MAGA mission." Let's jump in.
30%: Analysts Forecast Tariffs Will Stall Auto Sales By At Least 15%, Raise Vehicle Prices By As Much As $20,000
It's official: vehicle prices are going up. There's no other option for automakers—well, except insolvency, of course. But to keep on trekking, car makers will have to pass on the costs created by a slurry of tariffs that officially went into effect at midnight.
The predictions of higher vehicle costs and a downturn on sales are nothing new. But the extent of those tariffs, including the new reciprocal (and likely compounded) duty fees, put the market into a complete nosedive on Wednesday night. Market analysts with a beat on the pulse of the auto industry are now warning that things are going to go from bad to worse for every single car company.
First up is Bank of America analyst John Murphy. In a note published last week, Murphy predicts that the flood of new tariffs will put a serious hurt on the volume of auto sales. The best-case scenario? A 15% hit on annual sales volume, and that's if they only pass on enough of the tariff costs to just break-even on their new expected losses. If automakers passed all the costs to consumers, it's estimated that sales could drop by a staggering 20%.
“Tariffs will result in higher prices to offset the increase in costs,” wrote Murphy in his note. “In our view, the price increases will drive demand destruction, particularly as affordability has been a challenge for all buyers.”
Murphy is right. The average transaction price of new cars has been ticking higher and higher. In fact, the selling price of the average EV reached more than $55,000 in recent months. The Anderson Economic Group—more market experts chiming in on tariffs—expects that the vehicle costs could rise anywhere from $2,500 to more than $20,000 per vehicle.
Lower-impacted vehicles that are expected to rise between $2,500 and $4,500 include the Chevy Malibu, Ford Explorer, Honda Civic, Honda Odyssey and Volkswagen Jetta. Many medium-sized vehicles and pickups will be hit harder, including certain Jeep, Ram and Toyota-branded trucks (plus the Ford Bronco and Chrysler Pacifica). The impact on these is anticipated to be between $5,000 and $8,500 per vehicle. And on the higher end? Large SUVs with tons of Canadian, Mexican and European parts—we're talking the BMW X5, Cadillac Escalade and Chevy Suburban. Those will take hits of around $12,000. BEVs in that category, like the Ford Mustang Mach-E, could see an estimated increase of up to $15,000.
Luxury sedans, SUVs and sports cars from marques like Audi, BMW, Genesis, Jaguar, Lexus, Mercedes-Benz and others could see price hikes exceeding $20,000 just for OEMs to break even. The only hope, according to Murphy, is to shift some of the production stateside—though the average U.S. assembly plant is already operating at around 70% capacity.
60%: Automakers Have No Idea What Their Final Tariff Bills Will Be
Confused about just how much your next car will cost? Automakers and market analysts are, too. The entire industry is hunkered down in an attempt to figure out just how much compounding tariffs will drive up the price of each model sold on U.S. soil. And folks—things aren't looking great.
According to the latest from Trump's "Liberation Day" event, any automaker that imports cars or parts into the U.S. will face heavy tariffs of at least 25%. We knew that already, but what we don't know is whether or not those tariffs will be cumulative. This has left those at the top of the ladder wondering if they're paying just a final import tariff of 25%, or if they'll also be paying for reciprocal tariffs and more on top of that 25%.
Here's Automotive News digging in:
Many analysts expect the tariffs to be cumulative, meaning costs would stack on top of each other. A sedan imported from Germany, then, could be subject to the 25 percent auto tariff, today’s reciprocal tariff and the existing 2.5 percent levy on European vehicles, according to an April 1 analysis by Thibault Denamiel, a trade expert with the Center for Strategic and International Studies.
The U.S. imported $474 billion worth of automotive products in 2024, including passenger cars worth $220 billion. Mexico, Japan, South Korea, Canada and Germany were the biggest suppliers.
The quickly compounding tariffs are likely to cause headaches for auto manufacturers at the border and ports of entry, said Michael Robinet, vice president of forecast strategy at S&P Global Mobility.
“There are so many tariffs that suppliers are left sort of guessing what the total tariff will be when they get to the border,” he said. “It adds to the instability of the whole situation.”
Volkswagen, which has already said it refuses to relocate its plants, had no part of this. The automaker halted all rail shipments of its Mexico-built vehicles and plans to plainly call out the additional importation fees on the vehicle's Monroney label, according to a memo reportedly sent to dealers. VW has also said that its domestic production in Chattanooga will be impacted by the tariffs, but did not go into the specifics.
Another unknown is whether or not the USMCA exemption will be extended. Trump's 25% levy on goods from Canada and Mexico specifically excluded the auto industry, however, that exemption ends today with the collection of tariffs on all foreign cars and auto parts imported into the U.S.
That last part dives into how deep of a web the automotive supply chain really is. Between components, sheet metal and the wiring harnesses that tie the electrical components of cars together—the supply chain for even the most domestic of cars is a global behemoth. Untangling that nest could strain automakers financially and at the end of the day, may not mean lower costs for consumers at all due to higher production costs in the U.S.
90%: New York City Moves To Sue Tesla Over Musk's 'Abandonment'
If you had the City of New York attempting to hold Elon Musk accountable for turning Tesla into his personal megaphone on your bingo card, now is the time to cross it off. Specifically, it's being spearheaded by the city's comptroller, Brad Lander, who's aiming to sue Tesla's board for allegedly allowing Musk to tank the company's value while cosplaying as a Bond villain pretending to be a commander-in-chief.
Lander has long been an outspoken critic of Musk's antics, including his huge multi-billion-dollar pay package. And in the formal announcement preceding the city's pending litigation, Lander didn't hold back his true feelings:
“Ever since Elon Musk took over DOGE and became best-friend-in-chief with President Trump, Tesla—where Musk is supposed to be CEO—has suffered financially, causing enormous losses for Tesla shareholders,” said Lander. “In less than three months, Tesla stock has lost nearly 40% of its value, with losses over $300 million for the New York City pension systems."
The core complaint is that Tesla's board has stood idly by while Musk prioritized his other ventures. To recap, those ventures include: special government employee at DOGE, CEO of SpaceX, CTO of X, President of the Musk Foundation, founder of The Boring Company, founder of xAI, co-founder of Neuralink and, of course, the recent stint as a pseudo-political kingmaker. Those are some pretty serious titles to hold while also heading up the world's most valuable automaker.
Tesla's stock value has dropped significantly. While Tesla's board members managed to sell off tens of millions of dollars in stock, NYC's pension fund is heavily invested in Tesla and now, Lander is accusing the board of breaching its fiduciary duty to the company and its shareholders.
Here's an excerpt from the city's statement:
Despite stating in Tesla’s December 2024 SEC filing that “We are highly dependent on the services of Elon Musk, Technoking of Tesla and our Chief Executive Officer” and claiming that he “spends significant time with Tesla,” Musk has clearly abandoned Tesla in favor of DOGE and President Trump’s MAGA mission. By wreaking havoc on the Inflation Reduction Act, he is taking actions that are harmful to the market for electric vehicles. In addition, he alienated Tesla’s consumer base, causing Tesla’s vehicle sales to severely decline. Since 2017, the New York City pension systems have put the Tesla Board of Directors on notice over concerns regarding corporate governance and leadership, including the lack of a full-time CEO.
Whether or not this investigation turns into something fruitful like an actionable lawsuit is unknown. If this actually goes somewhere, maybe cries for Musk to divest from Tesla could actually go somewhere, too.
"We have long expressed concerns that the Tesla board has failed to provide independent oversight, or to require that Musk—or someone else—serve as a full-time CEO," said Lander. "Now, it appears that material misstatements from Tesla misled investors about his role at the company. That’s why I’m calling on the Law Department to file securities litigation: because Elon Musk is so distracted that he’s driving Tesla off a financial cliff and taking down shareholder value with it.”
100%: Did You Buy A New Car Ahead Of The Tariffs?
If there's one good thing that the tariffs accomplished for the auto industry, it was pushing buyers into dealerships to get a new car before prices go up. Automakers are beginning to turn in their Q1 sales figures and things aren't looking too shabby. EV sales are even up, for most automakers, anyway.
Were you one of the people? Let me know in the comments what vehicle you bought and how you like it so far.
