Carmakers use stealth price hikes to cope with Trump's tariffs

Los Angeles Times

06-06-2025

Car buyers racing to get ahead of President Trump's tariffs face an uncomfortable truth — the trade war is already boosting US auto prices, often in ways nearly invisible to consumers.
The sticker price on a particular make and model may not have changed, at least not yet. But automakers have been quietly cutting rebates and limiting cheap financing deals, adding hundreds of dollars to buyers' monthly payments even as the companies say they're holding the line on pricing.
Several have boosted delivery charges — a fee everyone must pay when buying a new vehicle — by $40 to $400 dollars, according to automotive researcher Edmunds.com Inc.
Some dealers, meanwhile, have decided to charge more for the cars already on their lots, knowing it will cost more to replace them.
These stealth increases could help automakers cope with Trump's 25% levies on imported vehicles without risking his wrath, particularly once cars that landed in American ports after the tariffs were imposed finally start reaching showrooms this month. They'd all like to avoid the social-media fury he unleashed on Walmart Inc. after the retail giant said the trade war had forced it to raise prices.
But the auto industry's subtle price hikes are already having an effect. The average sale price for a new car jumped 2.5% in April, the steepest monthly increase in five years, according to the Kelley Blue Book car buying guide. The average reached $48,699, almost a record. Incentives, which once knocked 10% off the price, fell to 6.7%. Zero-percent financing deals — a key come-on in this age of high interest rates — dropped in April to their lowest rate since 2019, according to researcher Cox Automotive. And at some point, car buyers may balk.
'On the consumer side, they're seeing several thousand dollars of actual-experience price increase, whereas the factory is saying, 'No man, we didn't raise prices at all,'' said Morris Smith III, a Ford dealer in Kansas. 'Stealth is a good word for it.'
While the steps have helped car companies avoid outright price hikes until now, those are coming. Ford Motor Co. told dealers it will raise sticker prices as much as $2,000 on three models it builds in Mexico — the Maverick pickup, the Bronco Sport and the electric Mustang Mach-E. Japan's Subaru Corp. is boosting prices $1,000 to $2,000 to help offset tariff costs, according to people familiar with the matter.
Hyundai Motor Co. is considering a 1% increase to the suggested retail price of every model in its lineup, a hike of at least several hundred dollars, Bloomberg reported last week. The Korean company also is likely to jack up shipping charges and fees for options such as floor mats and roof rails, which could turn off some inflation-weary consumers.
Other automakers are hiking prices on their new 2026 models coming this summer and fall, but attributing the increases to the model-year changeover rather than tariffs.
'With a new product, having a higher price is not 'raising price' in the game of semantics,' said John Murphy, an analyst with Bank of America Corp., at an event in Detroit Wednesday. 'So they don't really enrage certain folks that might come down on them for raising price.'
All of these changes — the sticker price increases, reduced incentives and higher fees — will become more visible to car shoppers in the coming weeks. Since the 25% levies went into effect on April 3, dealers have been selling from a shrinking stockpile of pre-tariff cars. (There's an exemption for cars that comply with the terms of the US, Mexico and Canada free trade agreement, which only face an import tax on their non-American content.) That process is nearly done, and by late June, dealers will face the new reality of lots filled with cars that cost more to bring into the country.
'There's nothing they can do to prevent this from having an impact,' said Sean Tucker, editor of Kelley Blue Book. 'There's not a single cliff, but the date they run out of those pre-tariff cars, that's when you're going to see the most dramatic change.'
Sales may suffer as a result. A recent survey from CarEdge.com found that 65% of new car buyers would walk away if monthly payments rose just 5% in a market where car prices are already near historic highs. An Edmunds survey released Thursday found three-quarters of car buyers said tariffs would be a factor in their purchasing decisions. Shoppers are already not getting the deals that were commonplace just months ago.
Take the Ford F-150 pickup, America's top-selling vehicle. Earlier this year, an F-150 could be had with a 1.9% interest rate on a 6-year loan, Smith, the Kansas dealer, said. Then, Ford only offered that rate for certain, higher-priced trim levels of the truck. Now, 1.9% financing is offered only on three-year loans, which are rare.
'The dealers I'm talking to have every expectation that in the next 90 days to six months, there will be pretty significant price increases across the board,' Smith said, 'assuming something doesn't happen with the tariffs.'
Some dealers are preparing for that day of reckoning by making as much money off their pre-tariff inventory as they can, charging over the sticker price. 'Dealers set final prices, and they're dealing with the knowledge that for every car they sell, it's going to cost them more to replace it than it used to,' Tucker said.
Automakers might not just raise prices on the cars they import. They may choose to increase the costs of their more expensive, US-made models so the full weight of the tariffs doesn't fall on some of the cheaper vehicles they make overseas. General Motors Co., for example, imports more than 400,000 cars each year from its factories in South Korea, including the $20,500 Chevrolet Trax.
'GM doesn't necessarily have to raise the price of the Chevy Trax by 25% in order to pay a 25% tariff on the Chevy Trax, because those buyers are the most price-sensitive,' Tucker said. 'So maybe instead, you bump up the price of the Silverado pickup in order to pay the tariff on the Trax. But GM isn't going to put that on a window sticker.'
Automakers may also drop the most affordable trims of their vehicles. Stellantis NV decided to pause making the entry-level version of its electric muscle car, the Charger Daytona R/T, because of tariff risks, the company confirmed in May. The R/T, built at an assembly plant in Windsor, Canada, currently starts at $59,595, while the more powerful Scat Pack trim starts at $73,190.
Cox forecasts tariffs could raise the price on imported cars by 10% to 15%, further exacerbating an affordability crisis. But those increases aren't likely to come in big chunks, instead phasing in slowly and quietly so as not to scare off customers, said Erin Keating, Cox's senior director of economics and industry insights.
Still, some potential buyers will walk away. Domestic sales could fall from 16 million in 2024 to 15.6 million this year, according to Cox. The outlook from consumer analysis company J.D. Power is even bleaker, with tariffs predicted to cut US auto sales by about 1.1 million vehicles annually, or roughly 8%.
Automakers are scaling back production in anticipation. More than a half-million fewer cars will be built in North America this year than in 2024, according to researcher AutoForecast Solutions.
'By enacting tariffs on Canadian and Mexican parts and vehicles, it slows the whole workings of this North American machine making vehicles,' said Sam Fiorani, AutoForecast's vice president of global vehicle forecasting. 'The vehicles that are being built will cost more, raising the price of vehicles and lowering the demand for them. It's all interconnected.'
Naughton and Coppola write for Bloomberg