Today is April Fools’ Day. But you know what’s no joke? Tariffs, which are on the docket to begin in an unprecedented way tomorrow. Automakers across the globe are scrambling to figure out how to deal with them, and soon dealers will need to figure out how to convince consumers that a car with a tariff-laden window sticker is suddenly worth paying a few extra thousand dollars for.
Welcome back to Critical Materials, your daily roundup for all things electric and tech in the automotive space. Dealers might wake up to an unsettling email in their inbox from Hyundai corporate this morning. Plus, U.S. auto buyers could start to feel the effects of tariffs in May, and Elon Musk is preparing to depart from DOGE. Let’s jump in.
30%: Hyundai Tells U.S. Dealers To Brace For Tariff Price Increases
Photo by: Patrick George
If you’re a Hyundai dealer in the U.S., there’s a likely fresh new email in your inbox that will make your eye twitch. It’s from Randy Parker, in case you need help finding it. Yeah, that Randy Parker. You know, the CEO of Hyundai and Genesis North America. And it’s unsurprisingly about the tariffs that go into effect tomorrow.
For all of us who aren’t privy to Hyundai’s internal emails, Reuters gives us the gist: prices of future wholesale cars? They’re “not guaranteed” once those blanket 25% tariffs on imported autos kick in. That’s essentially a fancy way to tell dealers to brace for impact and a warning to consumers that any car not already on a dealer lot could get more expensive.
Just how expensive? Well, that’s really up in the air. It depends on whether a car was imported in its entirety or assembled domestically. And even for cars produced within the U.S., foreign parts would be subject to 25% duties. The hikes are going to vary widely across the industry, but Cox Automotive estimates that tariffs could add another $3,000 to cars built within the U.S. or $6,000 for vehicles built in Canada or Mexico. Even for a brand like Hyundai, which has a large U.S. manufacturing footprint already, tariffs will increase vehicle input costs.
“Tariffs are not easy,” said Parker, not sugarcoating the reality of the situation to dealers.
Among foreign automakers, Hyundai is actually in pretty good shape right now. It already has a strong U.S. presence, and its newly announced $21 billion in domestic production investments are reshaping its tariff shield into more of a ballistic helmet. Yet, Hyundai does still seem a bit nervous even if Parker’s boss, Hyundai Motor Company CEO José Muñoz, won’t admit it.
That’s because Hyundai, just like many other automakers and even domestic ones, relies on global supply chains. And these new tariffs are poised to slap import duties on just about anything and everything auto-related that passes through the U.S. border later this week. So while a car assembled in Georgia won’t face a 25% import tariff, some of its parts (like an expensive computer module or specialized component) might still amass hundreds if not thousands of dollars in levies that could get passed onto the consumer.
The real impact here is the uncertainty that these tariffs bring. Dealers don’t know what to tell customers. Automakers are still figuring out how to price…well, everything. And consumers? They’re staring down the barrel of a price hike from a policy that seems like a bad idea to just about everybody besides the man in America’s driver’s seat.
60%: U.S. Will Start To Feel Auto Tariff Impacts Around May
Photo by: White House
Trump has been flip-flopping a bit on how he feels about automakers raising prices. On one hand, he reportedly issued a stern warning to any automaker that even considered the idea. And on the other, Trump has since said that he “couldn’t care less” about price hikes, which, at least the last time I checked, is the opposite of the promise to “make America affordable again.”
The president’s math is a bit fuzzy here. Higher production costs and static prices can only coexist for so long before they get passed on to the consumer, and Trump’s take on that is pretty much laissez-faire—whatever happens, happens. Economists and industry experts seem to agree on the outcome, though: If the tariffs go into effect tomorrow as planned, consumers will feel the impact sooner rather than later. And “sooner” could mean as early as May.
Let’s dig into that a bit.
Trump claims that the tariffs will lower car prices. But expecting a 25% tariff to instantly and miraculously lower vehicle prices is like replacing your spark plugs with firecrackers and hoping that fuel burns better. Rather, increasing the cost of production will almost immediately mean consumers pay a higher sticker price for their next car, at the parts counter for repairs, and possibly even for insurance rates.
If you ask Arthur Laffer—an economist awarded the Presidential Medal of Freedom, the nation’s highest civilian honor, by Trump during his first term—the significant tariff hike means that it will be “economically impossible” to keep vehicle costs down.
The Autopian published an excerpt from a paper penned by Laffer on Monday:
A 25% tariff without USMCA exemptions would create immediate and cascading cost pressures throughout the North American auto industry. The cascading effect would be particularly significant, as components crossing borders multiple times during production would face compounded tariff applications, likely multiplying the effective tariff rate far beyond the nominal 25%. This becomes especially problematic when considering the narrow profit margins within the industry. Manufacturers typically operate at around a 10% margin, with suppliers functioning at even lower margins, leaving minimal capacity to absorb these additional costs internally.
The scale of a 25% tariff on the integrated North American supply chain makes it economically impossible for manufacturers to shield consumers from price increases.
Laffer isn’t the only one with this take. The auto industry as a whole is raising a red flag on the move. That includes automakers themselves, all the way down the supply chain to the smallest parts suppliers. Ray Scott, the CEO of auto parts supplier Lear, sheds some light from a component manufacturer perspective:
“Tariffs, at any level, cannot be offset or absorbed,” said Scott in an email to employees cited by the Wall Street Journal. “A holistic, industrywide approach will be necessary to mitigate the impact.”
We know that the industry is forecasting a sweeping price hike. Just how quickly could we see it, and how bad could it really be? Scott says that dealers likely have enough parts and vehicles stockpiled across the U.S. to last until May—maybe June at the latest. After that, the very real bite of tariffs will start to be felt across the industry.
And that could result in an increase of vehicle prices between 11% and 12%, according to analysts at Morgan Stanley—even if they are already produced domestically. Yale’s Budget Lab says the overall average cost will be 13.5% higher than the cost of a new car in 2024. And even if you don’t purchase a car, the loss per household at the bottom of the U.S. income bracket will be between $450 and $500 annually due to the domino effect vehicle prices have on the rest of the economy.
Bringing back manufacturing jobs and bolstering domestic production sounds great in practice. And assuming that would even be the outcome, there would still be a long, arduous period leading up to that point during which automakers (and thus, consumers) would feel the pain of higher prices while those brands transitioned to new supply chains and invested billions in domestic manufacturing. And even then, there’s no promise that prices will come back down since, you know, the companies had to spend billions of dollars to transition to domestic manufacturing.
90%: Musk Prepares To Depart From DOGE. Can Tesla Recover?
Photo by: InsideEVs
Tesla CEO Elon Musk says the newly-minted Department of Government Efficiency (DOGE) is almost done with its cost-cutting program. The “special government employee” (SGE) is now teasing his departure from one of his most controversial roles yet amid a global backlash of his involvement in U.S. politics. The potential timeline? 130 days after he started—the cap of any worked designated as an SGE by the U.S. government—which puts the potential date marker at the end of May.
I know what you’re thinking: “Great, maybe he has time to actually run Tesla again while also being CEO of SpaceX, CTO of X, President of the Musk Foundation, founder of The Boring Company, founder of xAI and co-founder of Neuralink.” Not so fast—because Tesla’s troubles won’t just vanish into thin air once its CEO returns to the helm full-time.
While Musk has been waging ideological warfare on half of the nation and posting controversial commentary on X like it was his full-time job, his actual full-time job has been in a bit of trouble. See, Tesla’s share of the EV market is slipping. And it might not be something Tesla can recover from easily.
Tesla has been having a bit of a brand problem, too. Politically-fueled protests and vandalism aside, its grasp on both the mainstream EV and luxury segment has fallen sharply.
According to Cox Automotive, Tesla’s U.S. market share in the EV segment peaked in 2020. Since then, its sales have increased (hitting a record high in 2023), but it’s been losing steam as competition heats up and its lineup stagnates. Sure, the Model 3 and Model Y have been facelifted—but, so far, that hasn’t persuaded enough consumers to ditch the competition and pick up a Tesla. A further drop in sales and market share is expected for 2025.
Then there are the Model S and Model X, which (along with the Cybertruck) make up the brand’s more premium models. The S and X are also growing stale, contributing to a decline in brand consideration among luxury buyers. In fact, consideration from segment buyers dropped from 16% in 2021 to just 9%, according to Cox. That puts Tesla behind Lexus, BMW and Cadillac.
Wondering what the solution is yet? According to Allen Adamson, a branding expert and co-founder of marketing agency Metaforce, one possibility is Musk entirely divesting from Tesla. In an interview with NPR, Adamson agreed that the “best thing for the brand” would be if Musk split from the company completely—selling his shares and leaving his post—and instead focused on something he’s interested in. Adamson said that a CEO causing damage to a company’s sales isn’t all that uncommon. However, there’s “nothing at this scale” even outside the automotive industry.
100%: Will Tesla Ever Be Able To Separate Itself From Musk’s Political Involvement?
Photo by: Tesla
Continuing from our last story: I’m not saying Adamson is right, but let’s be real—Musk seems to have lost his love for building cars some time ago.
Sure, he has big plans for Tesla in investor meetings. But most of those plans just use electric vehicles as, well, a vehicle to achieve a software-based goal. In fact, he even declared Tesla to be an AI company (despite also heading up xAI), which investors seem to love. The hardware under the software (the actual cars) feels more or less unmoored.
The biggest question is whether or not a separation from Musk can turn Tesla around. It’s almost like the brand has a Musk-shaped stain on its lapel and its board isn’t quite sure how to work the washing machine.
So I want to hear it from you: Would Musk leaving Tesla be enough for buyers to embrace it again? Would the brand’s mission change? How might it regain the competitive advantage it once had? Let me know your thoughts in the comments.
