If President Trump’s proposed border tax becomes a reality U.S. consumers will pay significantly more for imported vehicles, according to a study released this month.
In what it describes as a “thought exercise,” research firm Baum & Associates LLC estimates that Ford would have to hike its price by $282 per vehicle to recoup the import tax it would be forced to pay.
And that increase is on the low end.
Honda would have to tack an additional $1,312 onto the price of its vehicles, Toyotas would increase by $2,651 per car and BMW vehicles would increase by $3,725, the study said. Volkswagen would be even harder hit. That German-based automaker would have to boost its price by $6,779 per vehicle.
Land Rovers would become much pricier
And the Jaguar Land Rover? Consumers would have to fork over another $17,204 to pick one of those up.
“That’s because those are luxury cars and they’re not built in the U.S.,” said Alan Baum, a principal with Baum & Associates. “Their volume is pretty low. They wouldn’t build a plant in the U.S., but they might have another company build them here.”
The Baum report addresses both imports of vehicles and parts for domestic cars that are made overseas.
Researcher puts the probability of an import tax at less than 50 percent
Baum said this is clearly a “what if” scenario and that the likelihood of a border tax being implemented is probably less than 50 percent. But that’s not saying it couldn’t happen.
“It would have to go through the congressional process,” he said. “And while there is support for it in the Republican Party and even some support among Democrats this would be an unusual move.”
Local dealerships are in a wait-and-see mode
Len Wilkerson, sales manager at Honda of Pasadena, said the subject of an import tax hasn’t yet come up at his dealership although some Hondas are made in Mexico.
“I think they would just redirect production somewhere else in the U.S. if that happened,” he said. “We still have some cars that are produced down there but Honda has a lot of factories in the U.S. I think they’d figure out something and not let this happen.”
Armen Avanessian, general manager of Glendale Mitsubishi, said Trump’s proposed import tax hasn’t become a topic of discussion there either — at least not yet.
“We have not thought about it,” he said. “There’s nothing in the works because we don’t even know what’s going to happen.”
Ford pulled back on building a plant in Mexico
Trump is pushing for the construction of new auto plants and the expansion of existing ones in the U.S. over a modest reallocation of production volume here. Ford recently pulled back on its plan to build a $1.6 billion plant in Mexico. The company opted instead to expand its existing facility for small cars in Mexico and to invest $700 million into an existing plant in Michigan where it will build electric vehicles and self-driving cars — a move that’s expected to create about 700 jobs.
Trump’s vow to impose a border tax has automakers on edge
There’s no doubt that Trump’s tough stance on keeping auto production in America is having an effect.
The Baum report notes that “many of the world’s automakers are deathly afraid to offend the new president, lest his tweets send their stock prices down — and with them the value of their top executives’ stock options (yes, that’s a factor, albeit not the only one!)”
The upshot, the study said, is that more vehicles will soon be produced in the U.S. than otherwise would have been the case. Baum said most of them will be Crossover Utility Vehicle-style trucks.
Automakers will probably continue to favor Mexico for small cars, the study said. But with continuing low fuel prices and shifting consumer preferences toward trucks, aggressive plans for new plants in Mexico will be scaled back.
“I think automakers are in a wait-and-see position,” said Todd Leutheuser, executive director of the Southland Motor Car Dealers Association in Cerritos. “But if I was the head of a large corporation that could be affected by the tariff … I’d be a little reticent to challenge the president or the administration on this. That’s always a concern.”
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