US Auto Production Increases Amidst Tariffs: What You Need to Know

Impact of Tariffs on US Auto Production

• 📈 US auto production is gradually increasing following two months of tariffs, with 56% of vehicles sold in the country built domestically last month.
• 🚗 Automakers are leveraging excess capacity in existing US plants by adding shifts and overtime to boost production.
• 💰 The increase in domestic production is sizable enough to move the needle, despite a slowing sales rate.

Vehicle Sales and Pricing Trends

• 📉 The sales pace in June was 15.3 million, according to Cox Automotive, indicating a slowdown.
• 💲 The average transaction price for vehicles has not significantly increased, with only a slight rise of a couple hundred dollars since April and March.
• 🏷️ The latest reading for what people actually paid at the dealership in June was $48,907.

Automaker Performance and Margin Concerns

• 📊 Ford's Q2 sales in the US increased by 14.2%, while GM's sales rose by 7.3%, as they quickly utilized excess capacity.
• ❓ A key question remains about the impact of tariffs on North American profit margins, especially since automakers still import vehicles from Canada and Mexico.

Foreign Automakers and Future Manufacturing

• ⚠️ The existing 25% tariff on European cars is costing German automakers billions.
• 🤔 Foreign automakers face a decision: absorb the costs in margins or consider building manufacturing plants in the United States.
• 🚫 Despite discussions, no foreign automaker has announced a new final assembly plant in the US since the tariffs began.