Please note that this article was drafted on March 5, 2025. The situation may have evolved since then – please check out the most up to date information via Automotive News.
The Auto Industry Faces Changes as Tariffs Take Effect
On March 4, 2024, the United States imposed a 25% tariff on imported goods from Canada and Mexico, significantly impacting the auto industry. Additionally, tariffs on imports from China increased from 10% to 20%. Even though the auto industry has been granted a 30-day reprieve, these policy changes are expected to increase vehicle prices, disrupt supply chains, and create financial challenges for dealerships nationwide as they go into effect.
Understanding the Tariff Impact on Auto Dealerships
What’s Changing?
The newly implemented tariffs target imported vehicles and auto parts, significantly affecting North American auto manufacturing, which relies on an integrated supply chain spanning Canada, Mexico, and the U.S. Key changes include:
- 25% tariffs on vehicles and auto parts imported from Canada and Mexico.
- 20% tariffs on imports from China, increasing costs on many automotive components.
- The possibility of retaliatory tariffs from Canada and Mexico, further disrupting supply chains.
With about 3.6 million vehicles imported from Canada and Mexico annually, these changes are expected to increase vehicle prices by $4,000 to $10,000 per unit, according to the Anderson Economic Group.
How Will This Affect Auto Dealerships?
- Rising Vehicle Prices
Manufacturers will likely pass higher costs on to dealerships and consumers, leading to price increases on new vehicles. With affordability already a challenge, dealers may see slower sales and increased financing hurdles for customers. - Supply Chain Disruptions
Modern automotive manufacturing depends on cross-border part shipments—many vehicle components cross the border multiple times before a car is fully assembled. Delays or shortages in key parts could result in vehicle production slowdowns, leading to inventory shortages at dealerships. - Higher Costs on Auto Parts & Repairs
Beyond new vehicle sales, service departments will feel the impact of rising costs on OEM and aftermarket parts. Increased expenses on brake components, fasteners, and critical repair items will pressure dealership service pricing.
How Dealerships Can Protect Their Bottom Line Amid Tariff Changes
With rising costs and market uncertainty, dealerships must focus on controlling expenses wherever possible. While tariffs are out of your control, managing operational costs is not.
- Streamline Procurement: Work with a Group Purchasing Organization (GPO) like Dealer One Stop to lock in pre-negotiated rates on essential dealership supplies, helping offset price increases.
- Optimize Inventory Management: Avoid overpaying for parts and supplies by leveraging vendor-managed inventory programs to reduce waste and streamline procurement.
- Cut Unnecessary Costs: From technology to office supplies, small savings across multiple categories can add up and help dealerships maintain profitability.
Partner with a Group Purchasing Organization to Reduce Costs
As the auto industry faces uncertainty, controlling operational costs is more critical than ever. Dealer One Stop helps dealerships navigate rising expenses by providing access to pre-negotiated pricing on essential supplies—from auto shop tools and chemicals to office supplies, technology, and breakroom essentials.
