By Isaac Bunick, CEO & Founder of MOTORMIA
In 1985, American-owned facilities in the United States manufactured 11.0 million automobiles, representing 97% of overall domestic (American- and foreign-owned) production of automobiles.
In 2024, Americans bought approximately 16 million cars, SUVs, and light trucks, and 50% of these vehicles were imports (8 million).
The auto industry is on to see how new US tariffs will affect their production and sales. The decision to place tariffs on goods imported to the US in order to strengthen and support local industries has huge ramifications when it comes to the auto industry. Firstly, buying foreign-produced vehicles is about to get a lot more expensive. Secondly, repairing or upgrading your vehicle with aftermarket parts that are manufactured abroad will also cost more. Thirdly, stateside manufacturing of vehicles and parts remains costly due to higher wages, energy prices, etc. Finally, it might not be feasible to move all manufacturing back to the US overnight in order to meet demand with local production. No matter how you slice it, prices are slated to go up.
Reduced vehicle demand for new vehicles could mean big business for aftermarket manufacturers, sellers and service providers
In a nutshell, vehicles are about to become more expensive for everyone. As a result, demand for new cars will drop and people will keep their vehicles longer. It still remains to be seen whether US buyers will be less willing to buy foreign cars when the price tags start going up. But vehicle owners and car enthusiasts will invest more on repairing, modifying or personalising the cars they already own.
So while tariffs will inevitably frustrate vehicle manufacturers and car enthusiasts, these macro-economic changes also bring a plethora of opportunities to a subset of companies. Businesses such as local garages, repair services or local manufacturers of parts and accessories will see an increase in demand as their product and services suddenly become a bigger necessity, and in some cases, more competitively priced in the eyes of consumers.
It’s important to note that there will be no tariffs on vehicle imports that are 25 years or older. While this is a small percentage of purchases, enthusiasts of vintage cars might seize the opportunity. In fact, a resurgence in “old classics” might be underway, even if these still represent a very small niche within the broader automotive market.
Time to rethink an ineffective supply chain?
For many decades, drivers who bought foreign vehicles and car parts have had to suffer long and ineffective supply chains. If a German brand has a US reseller that then sends the vehicles and/or parts to another distributor who then sells it to your local retailer or garage – that’s a lot of middle-men taking a cut. What’s more, the distance created between manufacturers and car enthusiasts or drivers also comes at a cost. Manufacturers don’t get first-hand feedback from end users, and it is often more frustrating for drivers to deal with intermediaries as opposed to having a direct line of communication with brands or manufacturers they trust and love.
Many, if not most, vehicle components, regardless of the nationality of the car, are either manufactured abroad or rely on internationally sourced materials. So prices will go up inevitably if and when tariffs take effect. The big questions that the US auto industry needs to ask itself are: can we try to streamline the current supply chain to offset some of the tariff costs on behalf of drivers? Is there an opportunity to build new or better Direct to Customer (DTC) relationships between manufacturers and buyers, drivers and car enthusiasts?
An opportunity for small manufacturers that are able to produce locally
Big European or Asian car manufacturers will inevitably suffer the most when it comes to tariffs. It is their product that will become a lot more expensive for US customers overnight. However, small manufacturers of parts and accessories might have a unique opportunity to leverage their nimble nature to thrive.
For example, an Italian friend of mine, a Tier 1 manufacturer of suspension and steering components. As soon as the tariffs were announced, he took the initiative to explore how to set up shop in the US. Instead of importing from Italy, he’d create a US-based entity that would cater to the local market. Small companies with agility and vision will find enormous opportunities and gain a real competitive advantage.
The United States trade deficit in automobile parts reached 93.5 billion USD in 2024. Currently, the U.S. automobile and automobile parts industry (American-owned and foreign-owned firms) employs approximately one million U.S. workers. This number might be about to skyrocket as small manufacturers of parts and accessories, like my friends from Italy, bring some of the production muscle to the US.
Direct To Consumer (DTC) to foster better relationships with brands
Drivers, and in particular car enthusiasts, are passionate about cars and love the opportunity to have a direct relationship with their favourite brands and manufacturers. In fact, all the middle men in a convoluted supply chain also creates a sense of frustration on both sides.
At my company MOTORMIA, where hundreds of thousands of people use our platform to build their dream car and discover the optimal parts and accessories to meet their needs (and budget), we see how this demand for more transparent, closer communications with manufacturers is something that car enthusiasts want – and that will benefit the industry as a whole.
With or without tariffs, this is something that has been brewing for a long time, yet sometimes a seismic shift like the one we are about to witness can be a powerful incentive to improve archaic supply chains, foster direct communications between drivers and manufacturers, and create a more modern ecosystem that keeps drivers on the road and manufacturers on the job.
