MW Tesla, Ford, General Motors brace for tariff squeeze in 'no ordinary' earnings season for beleaguered car industry

By Claudia Assis

Trump's tariffs are creating a 'ripple effect' on sales, inventory and prices

President Donald Trump has floated the idea of again pausing tariffs on cars as U.S. automakers deal with ongoing uncertainty around his policies and devise ways to potentially mitigate their impact ahead of quarterly earnings.

In the latest development, Trump said automakers may need "a little bit more time" to bring parts manufacturing to the U.S. from Mexico and Canada, without providing more specifics. Tariffs of 25% on car parts are set to take effect on May 3.

U.S. carmakers are scheduled to report earnings and update investors on their financials starting next week, with Tesla Inc. $(TSLA)$ expected to unveil first-quarter results April 22. General Motors Co. $(GM)$ is set to report on April 29 and Ford Motor Co. $(F)$ and Rivian Automotive Inc. $(RIVN)$ are slated to report in early May.

"This is not going to be an ordinary [earnings] season for sure," Evercore ISI analyst Chris McNally wrote in a note Tuesday. "When government policy is set with the same volatility and rigor as my [three-year-old's] morning routine, the only things that are for certain are 1, frustration and 2, sleep deprivation."

Edison Yu at Deutsche Bank said that the first half of the year is likely to be "fairly strong," as some people sped up plans to buy a vehicle before the tariffs hit.

Cox Automotive analysts said Tuesday that retail car sales have risen "sharply" in the latest week of data "as consumers try to get ahead of tariffs on imports" and before pretariff inventories are exhausted.

"Sales for used are up as well, just not as strongly. Momentum on the 2025 roller coaster ride is likely to remain strong at least through April. But as prices rise, buyers are likely to pull back," the Cox analysts said.

Yu also predicted a decline in volumes in the second half of the year, however, driving up average transaction prices and leading to a seasonally adjusted annual rate of 15.4 million vehicles this year, compared with 16 million in 2024.

"Our analysis suggests Ford and GM could see a gross cost increase of [greater than $10 billion] while Tesla and Rivian see materially smaller increases," Yu said in a note late Monday.

"Ultimately, we don't expect [original equipment manufacturers] to bear the full burden of these extra costs as consumers and dealers will take some of the hit ... and automakers also implement various mitigation strategies," Yu said. He estimated that Ford and GM could face a headwind of $4 billion to $7 billion.

"Unthinkable" tariffs of 25% on all imported vehicles are now in place, and "finished automobiles are no longer flowing freely across North America, and key automotive free trade agreements have been scrapped," Cox analysts wrote in a recent note.

"This significant shift in the automotive landscape is already creating a ripple effect that will impact sales, inventory, pricing and manufacturing," they said.

Carmakers are likely to use a combination of actions to mitigate the impact of existing and looming tariffs, Deutsche Bank's Yu said.

Unfortunately for U.S. consumers, raising vehicle prices is at the top of the list.

Car prices have climbed as advances in entertainment features and safety-related driver-assistance systems increase the cost of components.

The average price of a new car has steadily risen to just under $50,000 for a gas-powered vehicle, and once rare longer-term financing has become more mainstream as buyers focus on keeping monthly payments within their budgets.

Shifting production to U.S. plants by leveraging existing but underutilized facilities is also in the playbook, although Yu noted that wages for United Auto Workers members are up to 10 times higher than wages of workers in Mexico, with benefits factored in.

Building new U.S. plants, a costly and lengthy process, would likely be more feasible for Asian and European carmakers.

Even for American companies that manufacture vehicles in the U.S., 40% to 50% of parts come from abroad, Wedbush analyst Dan Ives said in a recent note.

"A U.S. car with all U.S. parts made in the U.S. is a fictional tale not even possible today," he said. "In our view it would take three years to move 10% of the auto supply chain to the U.S. and cost hundreds of billions with much complexity and disruption."

It would also add billions in costs to the auto industry "and will essentially get passed directly onto the consumer and clearly erode demand on Day 1 of tariffs," Ives said. "The winner in our view from this tariff is NO ONE."

-Claudia Assis

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April 15, 2025 13:17 ET (17:17 GMT)

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