Automakers have been footing a hefty tariff bill — to the tune of $30 billion across the industry this year, according to a recent analysis from Moody's.
The industry is also grappling with a shortage of semiconductors, leaving them without the chips they need to build some vehicles, as well as a fire at an aluminum plant that's hurting the supply chain for Ford and Stellantis.
Despite those headwinds, quarterly earnings reports from automakers are so far showing resilience. General Motors reported $3.4 billion in profits last quarter and Ford brought in $2.6 billion, both beating expectations. Stellantis, the maker of Jeep, Dodge, Chrysler and Ram, increased its revenues by 13% year over year. Hyundai, despite seeing a 29% decline in profits compared to the same quarter last year, still plans to meet its targets for the year.
Volkswagen Group, on the other hand, reported a more than billion-dollar loss, as it faced the combined costs of tariffs and Porsche's pivot from electric vehicles back to gasoline.
Part of the reason for automakers' positive reports is that Trump lowered tariffs on goods from Japan and Europe from 25% to 15%, and just recently announced a similar deal with Korea. While a 15% tariff is still substantial, the changes were welcomed by automakers.
Meanwhile, a recent policy change eased the burden of tariffs on imported parts that go into U.S.-built cars.
Automakers' bottom lines are also getting a boost from rising car prices. Companies have been cautious about passing tariff costs along to consumers, in part because cars are already so expensive — over $50,000 on average, according to Kelley Blue Book. There are real questions about how much more consumers are willing or able to pay. But gradual increases are now visible. Across the industry, prices are up about .5% this year, Ford says.
Meanwhile, the Trump administration's rollback of environmental rules is benefitting some automakers substantially — in particular, changes to emissions requirements that used to penalize automakers if they made too many high-polluting vehicles.
Suddenly, automakers do not have to manufacture electric vehicles, which they have struggled to make profitably. And they can build as many large pickup trucks as they can sell — which are both more polluting and more profitable. That's been a boost to companies like GM, Stellantis and Ford, offsetting the costs of tariffs.
Of course, that same policy change is a setback for all-electric automakers like Tesla and Rivian. Under the previous rules, automakers that wanted to make gas guzzlers could pay EV manufacturers for "regulatory credits," allowing them to borrow their rivals' green halos — and comply with federal rules. Now, that revenue stream for EV makers is being eliminated.
Tesla had strong sales last quarter, helped by the rush to buy EVs as consumers tried to take advantage of the now-eliminated consumer EV tax credit. But profits fell. (On Tesla's quarterly call with investors, Musk, as usual, was less interested in talking about those EV sales and much more interested in talking about the humanoid robots that he plans to sell.) Rivian is expected to report earnings next week.
Those policy changes are slowing the transition to electric vehicles. GM is ending production of its electric commercial van, and Stellantis is leaning heavily into inefficient Hemi engines, as a new CEO pivots away from a previous focus on electrification.
But executives are also consistently saying they still plan to invest in electric vehicles. "EVs remain our North Star," said Mary Barra, explaining that GM will continue to work on improved EV batteries.
Partly, that's because of competitive pressure, as Chinese automakers make increasingly attractive and affordable electric vehicles. But automakers also know that just as the Trump administration did a U-turn on EVs, a future administration might once again make climate change and air pollution major priorities.
"We expect adoption will increase over time and the market [will] continue to evolve — and maybe even regulations evolve," Ford CEO Jim Farley told investors.
So Ford still plans to move forward with a $30,000 electric pickup, despite the lack of federal tax credits or regulations that would encourage it. "We think this product is literally at the center of the future of the EV market in the U.S.," Farley said.
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