25% Tariffs

[CanuckRS]

So are Audi's now going to be 25% more expensive down south? If so, holy shit! Get em now while you can.

[KRracer]

It will drive the cost of the car up 25%, not necessarily the selling price.

Car manufacturers import the car at wholesale cost from the factory (which now is subject to a 25% tariff), and then mark it up (and that portion is exempt from the tariff).

So if the car sold for $100 before and the cost was $70, the markup was $30.

Now the cost is $17.50 more (25% of $70, not 25% of $100).

So will the US arm of the company pass on the full $17.50 cost increase? That will be the question.

But notice that the car won’t be sold for $125. The tariff isn’t on the selling price, it is on the “unmarked up” cost from Germany.

And there are games that can be played called Tariff Engineering, where Audi Europe could decide to sell the car to Audi US at true raw material and labor cost, say $50 in the above example, and then charge Audi US a licensing fee that covers the $20 wholesale markup. But that $20 won’t be subject to tariff. Now the tariff is just 25% of $50, $12.50. Just 12.5% of the selling price, not 25%.


Cheers,

KR

[CanuckRS]

Lots of opinions out there, let's see what really happens but either way it's not good for buying an Audi now.
Looks like my vehicle just went up in price, yay!

[pski]

Will be interesting to see how dealers react in the short term. Add ADM to existing inventory, or do they hold the line and move as much as they can before sales inevitably will slow down with higher prices due to tariffs.

[drvolkl]

Ordered my car last October... traded in my 2021 in on it about 3 weeks ago in anticipation of it arriving end of April or early May... kinda wondering how this whole tariff thing will work. My car is somewhere either still on a boat or in a port. Really hoping they can't up the price on me.

[NoGarageQueen]

It will drive the cost of the car up 25%, not necessarily the selling price.

Car manufacturers import the car at wholesale cost from the factory (which now is subject to a 25% tariff), and then mark it up (and that portion is exempt from the tariff).

So if the car sold for $100 before and the cost was $70, the markup was $30.

Now the cost is $17.50 more (25% of $70, not 25% of $100).

So will the US arm of the company pass on the full $17.50 cost increase? That will be the question.

But notice that the car won’t be sold for $125. The tariff isn’t on the selling price, it is on the “unmarked up” cost from Germany.

And there are games that can be played called Tariff Engineering, where Audi Europe could decide to sell the car to Audi US at true raw material and labor cost, say $50 in the above example, and then charge Audi US a licensing fee that covers the $20 wholesale markup. But that $20 won’t be subject to tariff. Now the tariff is just 25% of $50, $12.50. Just 12.5% of the selling price, not 25%.


Cheers,

KR

Thanks for sharing this “new” math. It’s a very interesting point. I have a friend whose Cayenne e-Hybrid just completed production yesterday. So far, the dealer has zero information on how the tariff might affect him. He still wants the car and has already decided he’ll “pay up” if he has to. They keep their cars for 8-10 years and they are replacing a 2017 Macan that has already begun to require some expensive service (no extended or aftermarket warranty).

I’m lucky not to be in the position of having a car in the pipeline - but following it here, and on other forums as I’m interested to see what happens. I really feel for everyone, including the dealers who will have many customers walking away from committed cars, and will be left with some very expensive inventory sitting on their lot. It’s got to be an extremely difficult time to be in the automotive industry, and of course, for those folks who need to buy a car.

[pski]

It's interesting how the auto sellers' (i.e. OEM & dealers) interests and the buyer's interests have aligned. My newbie goes into production this week with a projected June delivery. Three strategies I'm considering: (1) cancel now; (2) try to find a suitable alternative already on a lot; or (3) ride it out until closer to delivery and then decide whether to cancel. Each has its pros and cons, and a lot can (will?) happen over the next weeks. No doubt it will be a bumpy ride for everyone affected.