Automotive Industry Faces Uncertain Future Amid Tariff Pressures
Key Highlights
- Tariffs have increased costs for suppliers, who provide about 77% of a vehicle's value, squeezing their margins in a highly competitive industry.
- Market volatility and uncertainty are causing widespread nervousness among auto manufacturers and suppliers alike.
- Experts suggest that if vehicle volumes decline further, the industry could see a rise in bankruptcies and disruptions.
- Industry stakeholders are working collaboratively to absorb costs, but the sustainability of this approach remains uncertain.
- The future of the automotive sector depends on how long current tariffs and market pressures persist.
Automotive Industry experts say they are unsure how long business can go on before disruptions or bankruptcies - due to tariffs - start to occur.
"All of the Tier 1 (suppliers), everybody is nervous. Totally volatile market right now. Nobody knows what decisions to do," said Falc Borchard, vice president of sales at PIA Automation GmbH. The company makes machinery for auto manufacturers in Evansville, Indiana, and other facilities around the world.
Even the whole industry is feeling the strain from the President's decision to levy import taxes on vehicles and parts, suppliers might be feeling the most strain. Their businesses provide about 77% of the average vehicle's values but have had to rely on continually shrinking margins in a competitive industry said a top auto supplier lobbying group.
"It seems like the industry is doing a good job of working collaboratively to absorb these new costs," said Jeff Lamb, an attorney specializing in automotive disputes at the Detroit-based law firm Honigman LLP. "But how long they can do that is, I think, an open question."
"If you see volume start to dip, and you see less money available to keep the system, the whole industry going, you'll see an uptick in bankruptcies," he said during a virtual roundtable discussion last week.
To learn more about the impact of tariffs on automotive suppliers visit: Collaboration sustains auto suppliers amid tariffs, but challenges loom | Chattanooga Times Free Press