Price increases, layoffs, and production shifts, the "25% tariff" is reshaping the American automotive industry

According to Xinhua News Agency, the measure announced by U.S. President Trump to impose a 25% tariff on imported cars officially took effect on April 3.

In response, American automakers are adopting various strategies to cope with this uncertainty, including adjusting pricing, incentives, and production plans.

Deutsche Bank analyst Edison Yu pointed out in a report released this week that the responses from automakers vary. Ford plans to raise new car prices next month, Tesla has reportedly suspended the import of parts for the CyberCab and Semi projects, and halted the overseas sales of Model X and S produced in the U.S., while Volvo's truck factory is expected to lay off workers.

Deutsche Bank expects strong automotive demand in the U.S. at the beginning of the year, as consumers rush to buy cars before prices rise, followed by a slowdown in the second half of the year due to the impact of tariffs. It is expected that U.S. auto sales will drop to 15.4 million units in 2025, down from 16 million units in 2024.

Major automakers respond differently, polarization intensifies

Although the Trump administration has hinted at possible relief measures, specific details remain unclear.

Deutsche Bank currently assumes that all imported cars, except those compliant with the United States-Mexico-Canada Agreement (USMCA) rules, will face a 25% tariff until customs fully assesses non-U.S. sourced parts. Imported parts are expected to be affected by tariffs starting May 3. This brings significant uncertainty to automakers.

Deutsche Bank stated that automakers' responses vary. For example, Tesla has suspended the overseas sales of Model X and S produced in the U.S., and General Motors has also halted operations at its CAMI assembly plant.

Mazda, Mitsubishi, and Subaru have also taken various measures, including absorbing price increases and even completely halting the transportation of U.S. inventory Ford is offering extensive employee price discounts and is shifting production to its Fort Wayne plant. Honda has publicly stated that it will not raise consumer prices while assessing its response measures. Infiniti has indefinitely suspended production of two crossover models in Mexico. Rivian and several other electric vehicle manufacturers have maintained operations so far but are evaluating the longer-term impacts.

Some automakers are temporarily absorbing tariff costs, such as Mazda, which will continue until April. But other companies are preparing to pass costs on to consumers. Deutsche Bank noted that despite no large-scale public statements, "the cost impact should not be underestimated."

Industry Outlook: Sales May Decline in 2025

Earlier this month, Deutsche Bank remained cautious on automotive stocks.

In a report, Deutsche Bank stated that as the first-quarter earnings are announced in 2025, automakers still face significant uncertainty from new tariffs. They expect strong demand at the beginning of the year as consumers rush to buy cars before prices rise, followed by a slowdown in the second half of the year due to tariff impacts. U.S. auto sales are expected to drop to 15.4 million in 2025, down from 16 million in 2024.

Deutsche Bank's report pointed out that Ford and General Motors' gross costs could increase by more than $10 billion, while Tesla and Rivian are relatively less affected due to the nature of their supply chains.