A car costs nearly $2,000 more! Automakers raise prices to protect profits, and American consumers will foot the bill for tariffs

The details of the Trump tariffs have yet to be finalized, but the impact of tariffs on inflation is already evident, and a harsh reality is approaching: American consumers are about to bear the cost of $30 billion in automobile tariffs.

According to media reports on Thursday, consulting firm AlixPartners predicts in its annual global automotive outlook report that U.S. automakers will pass on 80% of the tariff costs to consumers, which means the price of each vehicle will increase by approximately $1,760.

Mark Wakefield, head of AlixPartners' global automotive market, stated:

These tariffs have created significant cost barriers, and we see consumers bearing most of the impact.

General Motors and Ford have already indicated that they expect to face tariff impacts of $5 billion and $2.5 billion this year, respectively, although both companies claim they will seek hedging measures through price adjustments and other means.

Wakefield expects that price increases will lead to a reduction of about 1 million vehicles in U.S. auto sales over the next three years. However, the consulting firm anticipates that as the impact of tariffs gradually weakens, U.S. auto sales will reach 17 million units by 2030, an increase of 1 million units from last year.

Tariff Wall Combined with Electric Vehicle Incentive Cuts

AlixPartners' forecast for sales impact is relatively mild, as the firm believes that tariff rates will decrease as the U.S. negotiates trade agreements with other countries. The firm predicts that the 25% automobile tariff will eventually drop to 7.5% for complete vehicles and 5% for parts, even lower than the tariffs on automobiles and parts under the United States-Mexico-Canada Agreement (USMCA). Wakefield stated that this tariff wall is unlikely to exist forever.

However, what truly has long-term implications is the Trump administration's move to reduce and eliminate incentives for electric vehicle sales, such as the $7,500 consumer tax credit for purchasing battery-powered vehicles.

Wakefield pointed out:

This will steer car buyers away from electric vehicles, as they will follow their wallets and purchase traditional gasoline vehicles.

AlixPartners has significantly lowered its forecast for U.S. electric vehicle sales, with a reduction of nearly half. The firm now expects that by 2030, battery electric vehicles will only account for 17% of U.S. auto sales, far below the previous forecast of 31%.

Traditional internal combustion engine vehicles will account for half of U.S. sales in 2030, up from AlixPartners' previous forecast of about one-third. The consulting firm expects traditional hybrid vehicles to make up 27% of the U.S. market by 2030, up from the previous forecast of 24%; while plug-in hybrid vehicles and range-extended electric vehicles will only account for 6% of U.S. auto sales by 2030, down from the previous forecast of 10%.

Additionally, Wakefield believes that this policy shift will undermine the competitiveness of U.S. automakers, sarcastically stating, "By 2028, American automakers will have the best V8 engines in the world, and by then they may also have the only V8 engines in the world."