A 25 percent tariff on imported vehicles could chill new-car sales, devastate dealership profits and trigger job losses at stores, dealers and their advocates say. That prospect has U.S. auto dealers nervously awaiting a Trump administration verdict that could jolt dealership bottom lines.
Up to 2 million new-vehicle sales could be lost, and sticker prices would skyrocket if the tariffs go into effect, forecasters say. It could price many consumers out of the new-vehicle market and ultimately result in fewer vehicle choices, leading to less traffic on dealership lots — a message dealer trade groups are lobbying hard to get through to the White House.
Even as retailers brace for the worst, many are holding off on changes to operations in hopes the tariffs won't come to pass.
"It's sort of like nuclear war. It's so unimaginable and the destruction is potentially so great, that what's the point of building a bomb shelter?" Mike Jackson, CEO of AutoNation Inc., the country's largest new-car retailer, told Automotive News. "It's to that dimension, and it's hard to believe that it's actually going to happen."
Jeff Dyke, executive vice president of operations for Sonic Automotive, the country's fifth-largest dealership group, calls the tariff threat troublesome. Up to 85 percent of Sonic's 100-plus stores sell luxury- or import-brand vehicles.
"Hopefully cooler heads will prevail," Dyke told Automotive News. "There could be some short-term pain, but hopefully that does not happen and we're able to move forward without it."
Last week, Moody's Investors Service said a 25 percent tariff would hurt almost all of the U.S. auto industry, including dealerships.
"Dealers heavily weighted toward imports ... will suffer significantly," Moody's Senior Vice President Bruce Clark wrote in a research note. "These companies have minimal U.S.-produced vehicle penetration to offset reduced sales from price increases on imported vehicles."
Among publicly held retailers, Penske Automotive Group, given its large presence in Europe, and Lithia Motors, which has a high percentage of domestic-brand vehicle sales, would suffer least, Clark said. Penske and Lithia declined to comment.