Auto Industry Braces for Price Increases Amid US Tariffs

A recent trade policy enacted by the United States is sending ripples through the automotive industry, potentially leading to significantly higher prices for consumers and threatening jobs across the UK.

Impact of Trump’s Tariffs

The 25 per cent tariffs on imported vehicles from the European Union, implemented by the US government, are creating a challenging environment for manufacturers. Despite a temporary pause on reciprocal tariffs against other trading partners, this levy remains in place and is already prompting adjustments to business strategies.

UK Car Industry Particularly Vulnerable

The UK automotive sector faces disproportionate risk due to its reliance on the US market. Approximately one out of every six cars exported from the UK ends up being sold in the United States, making brands like Jaguar Land Rover, Bentley, and McLaren especially exposed.

Manufacturer Responses

• Jaguar Land Rover: Temporarily suspended all shipments to the US for a month.
• Aston Martin: Plans to pass on some costs to consumers while actively seeking ways to mitigate the impact. They’ve also taken steps like invoicing stock already in the US and strategically reducing April shipments. To bolster their finances, Aston Martin is selling a portion of its Formula 1 team stake for over £125 million. Despite this, they anticipate a loss of roughly £30 million in gross profit due to the tariffs.
• Morgan Motor: Will share the tariff burden with US customers, increasing prices by approximately 10 per cent on models like the Plus Four ($85,000/£64,000).
• Ferrari: Has announced a 10 per cent price increase for select models, although certain families of vehicles – including the 296, SF90, and Roma – will maintain their current pricing. The company intends to absorb some costs itself.

Global Market Consequences

Industry analyst Scott Sherwood cautions that the effects extend far beyond US sales, potentially destabilizing the entire global market. He warned, “For customers, it’s inevitably going to lead to higher prices. There is a very high probability of job losses on both sides of the Atlantic.”

Potential Job Losses in the UK

The Institute for Public Policy Research estimates that more than 25,000 direct jobs within the UK car manufacturing industry are at risk if exports to America decline significantly. Pranesh Narayanan, a research fellow at the institute, stated that Trump’s tariffs have “huge potential to completely destabilise the UK car manufacturing industry, affecting tens of thousands of jobs and putting the Government’s growth plans in jeopardy.”

Aston Martin’s Mitigation Efforts

Aston Martin has proactively taken steps to lessen the tariff impact, including pre-emptive invoicing for stock already landed in the US. They are also adjusting shipment schedules to avoid full suspensions.

Ferrari’s Strategy

Ferrari’s strategy involves a combination of absorbing costs and raising prices; some models will see price increases of 10 per cent while others will have the tariffs fully absorbed.

As analyst Scott Sherwood observed, “Does anyone really want a Ferrari that isn’t built in Maranello?” suggesting that brand loyalty among luxury car buyers may shield premium brands from the full impact of increased prices.