Low-Priced New Cars Are in Demand, but Tariffs Put Them at Risk

Car and Driver

06-05-2025

Automakers are scrambling to adjust pricing and plan products amid the industry's tumultuous tariff situation.
Inexpensive models from automakers such as Ford, Kia, and Nissan are expected to be hit hard by the tariffs.
New-car shoppers want more affordable cars, but they also want more for their money.
The auto industry is suffering an acute case of tariff whiplash, and there's no cure yet on the horizon. Consumers, meanwhile, are finding some symptom relief in the form of cars priced below the national average, which is currently about $48,000. Case in point: Slate made a huge splash with the unveiling of its under-$28,000 electric truck, which could end up costing several thousand dollars less if the $7500 federal EV tax credit holds up. Of course, that may be on the chopping block as well.
Car companies, many of which have dropped their entry models in recent years, are now faced with addressing the public's increasing appetite for affordable cars. The timing is a little tough, though, as the cost of parts and production is predicted to be higher than ever. Both customers and manufacturers are watching prices and sales numbers with a bottle of Tums at the ready.
Across the board, automakers are rethinking pricing and product-planning strategies. Nissan announced a few weeks ago that it would be 'maxing out' production at its 6 million-square-foot facility in Smyrna, Tennessee. However, that doesn't include Nissan's least expensive models, the Versa, Sentra, and Kicks, all of which are currently built in Mexico. The Ford Maverick and Kia K4 are other notably inexpensive models made in Mexico.
This week, Ford said the tariffs will result in a $1.5 billion decrease in projected earnings before interest and taxes; the stock dropped 2 percent on Monday. In a release, the Blue Oval said the risks were 'substantial' to the industry, offering the verbal equivalent of throwing up its hands.
"[It makes] updating full-year guidance challenging right now given the potential range of outcomes,' Ford said in a statement. In other words, your guess is as good as ours.
Razor-Slim Margins
Vehicle affordability is a serious issue, according to Ed Kim, AutoPacific president and chief analyst. Automakers have increasingly exited from the affordable-new-vehicle space in the last five years. In the face of tariffs on imported vehicles and parts, new-vehicle prices are set to rise into the stratosphere, further alienating budget-conscious vehicle shoppers.
'Entry-level models typically have very little margin built into them,' Kim told Car and Driver. 'During the pandemic, when automakers faced supply disruptions and couldn't build as many new vehicles as the market demanded, they focused production on more expensive and higher-margin models to make up for the lost sales volume. This caused new-vehicle transaction prices to skyrocket, and most automakers haven't returned to the affordable-new-vehicle market since.'
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In the first quarter of 2025, sales of the Nissan Versa sedan were up 156 percent year-over-year for the quarter. The automaker expects an uptake for the Rogue and Pathfinder SUVs due to pricing reductions across all grades. For now, Nissan dealerships have 'ample' inventory at their U.S. retailers that is unaffected by the new tariffs, according to Lloryn Love-Carter, Nissan's senior manager of corporate communications. Prices on imported models will remain unchanged through at least June 2, she said, while keeping an eye on the impact and adjusting as necessary.
Kia is leaning into the steady success of its K4 sedan, and the Korean automaker has no plans to skimp on features. That said, the model is assembled in Mexico, which is squarely in the crosshairs of the trade war. So far, Kia isn't flinching.
'Reaching a specific price point can be made easier by simply reducing content, but Kia's artistry is in providing a high and relevant level of features at very competitive price points. That is a core strength of the Kia brand,' Steve Center, COO and EVP for Kia America, told us. 'The new K4 sedan is a perfect example. As one of the few new vehicles in America with a starting price under $22,000, K4 sales have increased every month in a clear sign that value and substance matter the most.'
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Adjusting the Messaging
The impact is likely to be most severe with entry-level models such as the Nissan Versa and Chevrolet Trax because almost all of them are built outside of the U.S., Kim said, since their inherently low margins necessitate keeping manufacturing costs as low as possible. As such, it is a very likely scenario that many—if not most of the entry-level models on sale today—could be dropped from their respective manufacturers' lineups because their business cases will evaporate with the new vehicle and parts tariffs.
'It's likely that many former new-vehicle shoppers will be pushed into the used market, which in turn will likely drive used-car prices higher,' Kim said. 'So, whether shopping new or used, the prospects for shoppers looking for an affordable vehicle are looking increasingly grim.'
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Allyson Witherspoon is the chief marketing officer for Nissan U.S., and she's focused on getting the word out, adjusting the message so consumers can quickly find the answers they need.
'We've been manufacturing in the U.S. since 1983,' Witherspoon told us. 'I don't think that's something consumers have thought about much in the past, but they are definitely looking now and trying to understand where things are produced, so we want to make sure that we reinforce that information.'
Even before the tariffs, there was a sparkle in the new administration's eye. Nissan had already recognized that the prices of cars were on the way up and consumer confidence was down. The Nissan team was already working on adjusting pricing and packaging to appeal to a wide range of buyers, from the base model all the way up to the top Platinum level. In some ways, the pandemic prepared automakers to be as nimble as they need to be right now, Witherspoon said. It allowed her team to toss out the rule book and figure out how to mine data effectively.
Even now, it's not all doom and gloom, Witherspoon said. Once the tariffs were announced, Nissan saw a massive spike in search traffic. So, the interest is there—at least while inventory is still in stock with pre-tariff pricing.
Kristin Shaw
Writer
Kristin Shaw fell in love with cars while visiting dozens of auto shows as a kid, which explains her fascination with fins and hood ornaments. She has competed twice in the Rebelle Rally, an all-female eight-day off-roading competition in a lifted Hyundai Santa Cruz. Her work has appeared in numerous publications like Popular Science, Road & Track, Edmunds, The Drive, U.S. News & World Report, Forbes, Today, The Washington Post, and more. Yes, she knows she has the best job in the world.