Stellantis N.V. (NYSE: STLA | STLA Price Prediction), the maker of Dodge, Jeep, Chrysler, and Ram, said it expects to take a $2.7 billion earnings loss in the first half of this year. The primary cause, management said, is tariffs. The price of its EU imports to the United States may rise as much as 30% if proposed tariffs stay in place. Stellantis will need to sharply cut production because of the effect of these tariffs on its sales.
Stellantis sales in North America declined 25% year over year in the second quarter. While sales of the big two U.S. car companies have been steady in their home market so far, a 25% tariff on cars and parts imported by American manufacturers is expected to raise the price of a new car as much as $7,500 on average. That would put an extraordinary drag on sales at Ford and General Motors.
U.S. car companies are built for annual American new vehicle sales of 15.9 million, which was the number in 2024. That was up 2.2% from 2023. GM has a market share of 17%, while Ford’s is 13%. For each, sales outside the U.S. are modest. What happens in America is at the core of their revenue and earnings.
It is impossible to guess what a $7,500 price increase would mean to sales volume. New car prices rose over 17% between 2019 and 2021 because of COVID-19 hits to supply chains. Car sales dropped by 15% between 2019 and 2020. The market did not start to recover until 2022.
U.S. car owners have an alternative to paying higher prices. While used car prices might rise with new car prices, Americans have a habit of hanging on to their cars. The average age of a car on the road last year was over 12 years. Companies that sell cars in the U.S. cannot count on buyers if there is a spike in prices.
The U.S. car business is in for a terrible shock if it has to sharply raise prices overnight. Under proposed tariff plans, that could happen.
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