Ford Motor Co. (NYSE: F | F Price Prediction) has told its dealers it will not raise prices on cars already on their lots. It warned that it will soon pass on a tariff that would probably be 25%. Those price hikes will probably happen in May, and dealers face potential car buyers unwilling to pay a new, large premium.
Automotive News published part of a memo sent by Andrew Frick, president of the Ford division that handles retail sales. It said, “However, in the absence of material changes to the tariff policy as articulated to date, we anticipate the need to make vehicle pricing adjustments in the future, which is expected to happen with May production.”
Not all Ford vehicles will face a 25% tariff because some and their parts are made in the United States. However, the higher costs will probably throttle customer demand. At some point, if the tariffs are in place for months, dealers will run low on cars, even if buying is not robust.
Most dealers have an inventory of 60 to 90 days worth of cars and light trucks. That inventory is constantly being replaced. Sometime in early summer, replacements that carry higher prices could push MSRPs up by anywhere between $5,000 and $15,000.
Just as difficult as price increases is that Ford may start to run low on cars. If car parts are affected enough by tariffs, its own margins will begin to erode. Ford has a huge number of fixed costs from factories and labor to warranties. That tariff-based profit erosion will hurt earnings. those earnings are already dragged down by a $5 billion loss in its EV division.
Ford has a tariff problem, and it has warned its dealers.
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