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This week, virtually every major automaker posted sales numbers for the second quarter of this year, and it's clear Americans are still scrambling to buy cars before President Trump's tariffs are finalized.
For General Motors, Honda, all Head good Quarters, actually Toyota did as well.
David Welch is Bloomberg's Detroit bureau chief, and he's been tracking that sales data closely. There were winners, David says, and there were losers.
Still And has had a tough quarter. Nissan had a tough quarter. Both of them have had pre existing problems, but they didn't seem to capitalize on consumers running the dealerships as much as the others. And of course Tesla down thirteen percent. Very tough quarter for that, David says.
What we're seeing now with the auto industry is a new chapter in a story that started a few years ago. The reason for the price hike too few vehicles for sale during the pandemic and too many buyers.
How anybody can afford paying as much for a vehicle or a truck as a.
House, And that run up in prices has intensified because of the ongoing trade.
War, and what we're going to be doing is a twenty five percent tariff on all cars that are not made in the United States. If they're made in the United States, is absolutely not terror.
That was President Trump back in March. The introduction of new tariffs started what David calls a buying bonanza. Americans wanted to get their hands on a new ride before prices got even higher. We're hearing reporting that a lot of consumers are front running the implementation of these tariffs. But what this week's figures show is that surge in sales couldn't last forever.
The storious consumers raced out to get ahead of the tariffs, and they did just that. So you had a bonanza for car companies in April and May, but you had a hangover from it some payback in June when the tariffs actually went into place and everyone who bought, not everyone put a lot of people who bought had already gotten their car and didn't need to go, and so you saw sales really geared down that last month.
I'm David Gera and this is the big take from Bloomberg News today on the show. It's a nobody's market in cars. Why consumers, dealers, and manufacturers are all bracing for tougher times ahead. What that means for you if you're in the market for a new car this summer. Right after the largest car makers reported sales numbers for the second quarter this year, for April, May and June,
I sat down with Bloomberg's David Welch. Before we dug into the details, I asked him for the big picture on those reports.
It was a pretty solid quarter. Actually, you had a lot of people racing to buy cars in April and May to get ahead of tariffs that were going to be put in place. Those people did manage to avoid some extra costs from that, and then you had to pay back in June. Some companies were down, some companies
were up just a little. So it tells you that people once they got the cars they needed and the tariffs came out, there us a big payback for all of that bonanza buying that went on early in the quarter.
So it's not a stretch to say, looking at these sales data that this is a tariff's story.
It is. You know, consumers aren't dumb. I think Trump put in a lot of tariffs in place on different goods in his first term, and I remember when you put tariffs on the EU. I remember seeing people running out to buy wine because it was sort of publicly out there that French and Italian wines were going to get hit with tariffs. And so it makes more sense with a big purchase than it does with a bottle of wine because depending on what the car companies are
going to try to pass through. But you put five percent down an average price of a vehicle close to fifty thousand dollars, that's real money.
David, I confess, as a journalist who covers this day in the day out, it is hard to keep track of what tariffs are in place, what have been put on pause, what may or may not be coming down the line. Can you just describe the trade environment that car manufacturers are having to deal with right now.
Yeah, it's tough. So the big ones with this market, I should say the most common ones would be Mexico and Canada. So you've got some big tariffs on the non US content in those cars. So if the cars themselves were made with a certain amount of parts that are either made in the US or made at a certain wage, level. Then they qualify for USMCA. They come over here with a minimal tariff, but the parts in them that were not made in the US, there's still
a terrify on those. To vehicles made in Korea, made in Japan, made in Canada or Mexico get hit with some pretty big tariffs. You haven't seen companies pass along a lot of that cost yet. They've been sneaking in some price increases or just cutting some of the discounting, rebating, zero percent financing deals that they had in the months leading up to implementation the terrors, But right now they're
basically eating it out of their bottom line. So second quarter earnings will be very interesting for a lot of these companies, and I think the reason they're doing that is they're waiting to see what happens with trade negotiations. You know that there's the whole you know, Taco Trump always chickens out, So there's there's that. And also if you're General Motors, Hundai, Kia, or Toyota, you're not going to make any big change. Go wait and see what trade deal comes out.
I'd love to shift from what manufacturers are doing to how consumers are doing in this moment. So I'm interested in the consumer psychology of car buying in this in this environment. What are they dealing with and you mentioned that buying bonanza a few minutes ago. How are they dealing yes, with these tariffs, but also with higher interest rates and kind of the broader economic environments challenges.
Oh, that's a big problem. Affordability has been an issue in the auto industry for a while. And what happened during COVID semiconductor shortage is you have had shortage vehicles, so the car companies just got rid of all discounts. They were steadily raising the sticker price on vehicles and the dealers wouldn't In some cases were gouging, but in most cases the dealers didn't have to bargain because they didn't have a lot of inventories. They sold them at
sticker price. And what the auto industry discovered was if they made fewer vehicles and sold them at higher prices and paid fewer people to do it, their profits were better. And they've tried pretty hard to stick to that ever since. So bottom line is, even if car companies wanted to push price increases in in order to make up for
what they're losing on tariffs. It's really hard to do it because consumers are already beset by high interest rate, high prices, and they're kind of pushed to the limit.
Yeah, this driver of a twenty fifteen Honda Odyssey was surprised to see the average price of a new car is forty eight forty eight thousand dollars. I mean, there have been substantial increases.
It seems the used car market is not the great refuge that it was in years prior. So if you need to drive, is our spend more when you go buy it or just keep paying the repair shop and keep it going until maybe something breaks.
What story are we we being told by these companies about the state that they're in right now.
Ford had a good quarter, although it was against a pretty weak comparison a year ago because they had some production issues, but they had solid numbers. How ahead, a pretty good quarter. They've been really gaining market surely. General Motors has been gaining a fair amount of market Sharely that was the bugbear for the company for decades. They're selling a lot of evs. They've vowed that they're not
going to put in price increases. Well, they're dealing with these tariffs and they're going to start building more vehicles in the US, So I think they see an opportunity to if they keep their prices where they are, continue to pick up market share while others are maybe a sneaky way taking away some of the discounts. And because they know some of their competitors are, particularly Toyota, are more exposed to tarifs in there, you do have your
laggers here. Stillantis and Nissan continue to struggle. They're having problems.
We haven't talked about Tesla yet, and that company reported sales numbers on Wednesday morning, global sales down thirteen percent from a year ago. As you look at those numbers, is the story they tell? A similar one, a unique one. How should we think about Tesla in the context of the broader car market.
I think Tesla's story here is pretty unique. They have, frankly, a pretty stale product line. And that's not me writing cover views about Tesla saying I think the cars are stale. The model Y is pretty fresh, and it just hasn't really given them the big sales boost that they need to stave off this decline. So if you look at the four models that Tesla sells the most of the models Sedan Model X kind of a crossover. It should be Model three's they're smaller Sedan, Model Y. They're sort
of stylistically different sizes of the same sausage. Right, So even though there's a new model Wine it's got some better technology and so forth, it doesn't tell consumers that there's something really new here. You also have the cyber truck that's clearly a niche vehicle, one because it's expensive, and two because it's it's a stylistic oddity, let's face it. So that has moved the needle for them, and they haven't gotten out the really inexpensive tesla that they've been
talking about, the Model two. So they're kind of stuck in this situation where they've got a pretty stale lineup.
After the break, What this slowdown in sales signals for manufacturers and what potential car buyers might expect to see as tariffs hit company's bottom lines. As cars have gotten more expensive, car makers have relied on incentive. A big one has been a tax credit for electric vehicles that was part of the Inflation Reduction Act. A seventy five hundred dollars tax credit, that's been in place since twenty twenty two, but the Senate version of the Tax and
Spending Bill does away with it. Bloomberg's David Welch says that poses a real threat to an industry that's already vulnerable.
In China, you've got BYD and the domestic car companies with very good electric vehicles really surging, and the European automakers themselves have good evs and do pretty well competition stuff there In North America, Ford had a particularly terrible quarter in EV sales, but General Motors is coming out strong. Hyundai and Kia are both very competitive and have good product. It's not the oligopoli or near monopoly that Tesla had
five or six years ago in the US market. You know, there's something else obviously going on, which the politics of Elon, and I've seen some research that suggests that as high as eighty percent of ED buyers are let's call it somewhere left of center politically. They're not going to buy a vehicle from Tesla because of you. Not every one of them, not everybody really follows what the CEO does.
But Elon was actually working with the administration, and I think he did turn away a lot of buyers, and that's really hurt them.
What would that mean just quickly for these car makers? And you and I have talked before about the challenges facing car makers who make up electric vehicles. If that tax credit is phased out, as it is in the Senate version of this bill, what does that mean for a GM, for a forward, for companies that have more than dabbled in in electric vehicles lately.
Look, it's really tough. You know, this is a seventy five hundred dollar tax incentive. Not every vehicle qualifies, but I think the ones that would be affected by this the most to the buyers who are most sensitive. So you take something like a Chevy Equinox. That's GM's fastest growing electric vehicle. You can get in one for thirty five thousand dollars and it gets over three hundred miles
of range and it's a pretty nice little vehicle. And right now I think that's, you know, that's the vehicle for the non rich person who wants to go electric. That vehicle was twenty seven to five after the tax credit. Now it's back up to thirty five thousand dollars. General Motors is racing to reduce costs for its electric vehicles.
Everybody is because the vehicles themselves are going to have to stand on their own two feet in the marketplace sell based on the price, and the company are going to have to either reduce losses or try to make money on them.
There was an ominous line in our coverage I'll quote from it. With already high car prices expected to rise further as automakers manage billions of dollars in tariff costs, it may only get worse from here. What does the forecast look like for the second half of twenty twenty five.
It's not good. The most of the forecasters are looking for even more payback than we saw in June, because there was some buying ahead in those months. But also I think what a lot of them are looking at is we could get more clarity in the second half on tariffs, and clearly Trump is to keep some tariffs in place. So let's say he gets a deal with Japan and Korea. Maybe it's not fifty percent, but maybe it's ten or fifteen percent, and then the companies will
start to adjust to that. They can't move production immediately, so maybe they start raising prices. And parts makers also start raising prices and eventually they try to push this through to consumers. I thought General Motors moved to invest four billion dollars and move production to the US from Mexico was instructive in the sense that they've got people
talking directly to Trump himself and the Trump administration. So I'm not saying they've got a perfect read on what Trump's going to do, because he's very unpredictable, but they got enough of a read on the permanence I think of these tariffs, and to announce this four billion dollar investment in moving a lot of production back from Mexico that's going to take in two or three years to do, that tells me that the Trump administration said, yeah, we're
keeping this stuff in place, so deal with it, and that's how they're dealing with it.
If you look at all of these manufacturers and how they operate, are there ones that are better positioned to weather these tariffs than others? And I guess vice versa. Are there those who stand to have more trouble than other manufacturers.
I think Honda and Ford are very well positioned for this. GM They've got a problem. Almost half their sales came from someplace else. Toyto's got heavy tariff exposure here because they get about half of their sales coming from Japan, and they look the Europeans even you know, they had moved a lot of production to Mexico for proximity and because of USMCA, but that's all been kind of blown up.
As these tariffs come into effect and stay to effect, are consumers going to be aware of how high they are and how they're affecting the prices? In other words, I think back on when there was that minor tempest involving Amazon where they were going to list how much prices were up because of tariffs. Are car company is
going to do something similar? Do you think are we going to see on a bill of sale for instance X In addition, because of the way that these tariffs are affecting the bottom line at these companies, I.
Don't think they'll have that kind of transparency into it. What consumers will just notice is they were shopping for some vehicle a couple months ago, and they look now and it's even more expensive where they tend to pick up.
Most of this is basically news reports reported by US, reported by our competitors, and reported on TV that prices have gone up, and even if they don't know the exact amount, they just know that broadly speaking, cars have gotten expensive and that they've got to either put off that purchase or go out and buy something before it gets even worse. And then they start to really do their research.
This is the Big Take from Bloomberg News. I'm David Gera. To get more from The Big Take and unlimited access to all of Bloomberg dot com, subscribe today at Bloomberg dot com slash podcast offering. If you like this episode, make sure to follow and review The Big Take wherever you listen to podcasts. It helps people find the show. Thanks for listening. We'll be back tomorrow