Bad Wave
December 15, 2025
Alex KiersteinTariff price increases are coming for new vehicles, and it's just one of several converging trends that will hurt affordability.
After the current administration’s significant tariffs on many industries and countries, including automakers’ imported products, were imposed, price increases didn’t emerge right away. Common sense implies that price hikes must, eventually, be imposed. It takes time—years—to set up new production lines in the US. Investors won’t let the bloodletting continue indefinitely. It seems that 2026 will be the year in which the tariffs catch up to consumers.
Porsche is a good example. For one, despite chatter about the company building some of its cars at an underutilized Volkswagen plant in Chattanooga, that’s not a certainty and it’s not a quick fix. That means for now, every Porsche sold here is built in Europe, and thus every Porsche is subject to tariffs. Arguably, Porsche buyers are going to be more able to absorb the significant increases necessary to offset the 15% (down from 27%) tariff on German vehicle imports.
That’s because the tariffs have cost Porsche $813m, according to the company’s own estimates, per Automotive News. It’s just a portion of the $3.6b that Porsche will spend in 2025 as it deemphasizes, cancels, or reengineers BEVs and figures out a mix of future hybrid, PHEV, and BEV models. The company still expects to generate net positive cashflow, but prices are going to rise around 2% come January 2026.
The wave is slowing gathering for other automakers. While it’s just one aspect of new car vehicle pricing and sales, Cloud Theory tracked marketed vehicle prices for 2026 model year vehicles and found a significantly higher number of vehicles with increases of at least $2,000. That’s compared to the typical $400 adjustment for a new model year vehicle’s marketed price during the changeover.
Let’s also put this in the context of broader transaction prices, $50,000 or so as of this writing. As Cox puts it, the reason is that the market is “heavily influenced by affluent households.” Another way of saying that is “more people are being priced out of buying new cars.” Or that used cars, being safer and more reliable than those of the past, are being driven longer. The average age of the total US vehicle fleet is 12.8 years, a 25-year high and part of a continuing trend of an aging fleet year-over-year.
Cox doesn’t see an immediate end to these trends. Wealthier buyers with more spending power are driving the market, and sales of vehicles below $30,000 are falling behind, making up just 7.5% of sales in November 2025.
Think about that number for a second. 92.5% of all vehicles sold in November cost more than $30,000. Do automakers respond to this by increasing production of lower-cost models? That’s not how supply and demand work. And those numbers don’t imply that there will be any relief driven by the free market.
It’s a grim outlook for those of us who don’t fall into the affluent set of buyers. I expect the average age of the US fleet to continue going up as the less wealthy among us are driven to late model used cars, priced out of the new car market by a confluence of unrelated trends with no end in sight.
Recent Posts
All Posts
December 15, 2025
December 15, 2025
Leave a Reply