Industry News: Why New Car Prices Are Expected To Rise Next Year

[William Maley]

Yesterday, President Donald Trump announced a new round of tariffs on about $200 billion in Chinese goods beginning next Monday. The tariffs are set at 10 percent and could rise to 25 percent in January if the Chinese government refuses to offer concessions. Today, the Chinese government announced that it would take retaliatory action by placing tariffs on $60 billion of U.S. goods.

This is bad news for automakers as the Detroit Free Reports that more than 100 car parts - ranging from tires to batteries - will be hit by the tariffs.  Analysts told the paper the increased tariffs will raise prices and cause sales to fall, along with profits being cut for automakers.

It's going to be felt by Americans and it's going to be a big deal. Tariffs are taxes on consumption. Eventually, costs will be passed down to the consumer. This will drive vehicle costs higher. It also includes a lot of body shop equipment," said Peter Nagle, senior analyst at IHS Markit.

Analysts all agree that prices will go up, but aren't sure by how much.

"Prices are going to go up, but they won't go up by 25 percent. It is most unfortunate that this is coming at a time when the auto cycle is in very late stage. Vehicle sales already are in slow decline. This will probably will be quite a gut punch when they are forced to raise prices," explained Jon Gabrielsen, a market economist who advises automakers and auto suppliers. 

"It covers literally everything that goes into the construction of an automobile, from the smallest components and material inputs like the cords in tires and shafts and gears and bearings all the way up to completed engines and, in some cases, chassis with engines mounted. Thing is, it takes about three years to source each product. It takes many years and possibly a decade to make that full move."

Automakers didn't comment as to how they plan to absorb and pass the cost onto consumers. They did reiterate pleas for both governments to sit down and work this out.

Source: Detroit Free Press, Bloomberg via Automotive News (Subscription Required)

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[Drew Dowdell]

Even the most American Made vehicles will see a price increase.   Just the older tariffs on steel and aluminum were going to increase the price of an Avalon by $1700.... that's before the tariffs that just happened this week. 

[ykX]

If the prices on new cars will go up significantly, than the used cars will go up as well, simply because more people will start considering used instead of new.

And I was hoping to replace my wife's car next year

[Drew Dowdell]

5 minutes ago, ykX said:

If the prices on new cars will go up significantly, than the used cars will go up as well, simply because more people will start considering used instead of new.

And I was hoping to replace my wife's car next year

Used car prices are already rising. 

[balthazar]

Buying brand new is by far the least efficient use of one's transportation dollar.

[riviera74]

Since the USA does not have the capacity to make as much steel and aluminum as it did back in 1970, the tariffs are all bad for anyone who does not own a steel or aluminum mill (or those who work there).  Apparently the president thinks he can bring back the 1950s economically speaking.  No one told him that tariffs are a bad idea period.  NO one told him that inflation is bad too.

[ykX]

15 hours ago, balthazar said:

Buying brand new is by far the least efficient use of one's transportation dollar.

Disagree, I think leasing is the least efficient financially.  Buying new is fine as long as you keep your cars for a long time.

[daves87rs]

Better be thinking about the bus...it’s all going up!

Not only the cost of the car, but the price to maintain it as well. Start expecting 50 buck oil changes..

Add that to the fact are are due for a nasty fuel price increase-and it doesn’t even make sense to own more than one car....

[Drew Dowdell]

16 hours ago, daves87rs said:

Better be thinking about the bus...it’s all going up!

Not only the cost of the car, but the price to maintain it as well. Start expecting 50 buck oil changes..

Add that to the fact are are due for a nasty fuel price increase-and it doesn’t even make sense to own more than one car....

Oil change cost per change go up, but the time between oil changes has been increasing.  I get 7,500 miles between oil changes in the Honda and up to 10,000 miles in the Buick.  My old 2004 CTS would do 12,000 miles before it was down to 10% oil life, but that got a lot of highway miles. 

Same goes for other maintenance items as well.  Many manufacturers are moving to ceramic brakes.  I just did my first brake job on the Buick.... at 80,000 miles. It cost $600~ for 4 rotors and pads... but once in 80k miles, I can't be mad about it.  I never changed the brakes in the 48k miles I had the CTS and when I had them checked before turning it in, they said they had a lot of life left.

I remember my old Cutlass barely making 25k miles between brake pads.  My ex's Grand Am was similar.   

I don't mind more expensive maintenance as long as it is significantly less frequent.

[David]

Longer life before having to replace maintenance items is great. $80 synthetic oil changes every 10K miles is fine. Even when you break down a $2,000 100,000 mile maintenance for the Escalade is cheap over the life of those miles. 

I think some people are shocked to see a price tag that way if they are used to cost being every 25-30K miles. but it really is cheaper. The maintenance cost was $200 a year for the 10 years before having to do that 100,000 miles service.

[daves87rs]

12 hours ago, Drew Dowdell said:

COil change cost per change go up, but the time between oil changes has been increasing.  I get 7,500 miles between oil changes in the Honda and up to 10,000 miles in the Buick.  My old 2004 CTS would do 12,000 miles before it was down to 10% oil life, but that got a lot of highway miles. 

Same goes for other maintenance items as well.  Many manufacturers are moving to ceramic brakes.  I just did my first brake job on the Buick.... at 80,000 miles. It cost $600~ for 4 rotors and pads... but once in 80k miles, I can't be mad about it.  I never changed the brakes in the 48k miles I had the CTS and when I had them checked before turning it in, they said they had a lot of life left.

I remember my old Cutlass barely making 25k miles between brake pads.  My ex's Grand Am was similar.   

I don't mind more expensive maintenance as long as it is significantly less frequent.

That’s my worry, that even though we may get better parts, the cost will go way up...