*

Analysts predict gradual U.S. price increases, focus on

higher-end models

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Automakers face $2,300 added cost per vehicle due to

tariffs

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Destination fees rise 8.5% for 2025 models, offsetting

tariff

costs

By Nora Eckert

DETROIT, Sept 18 (Reuters) - Automakers have been

absorbing billions in added expenses since U.S. President Donald

Trump's tariffs took effect in April, sparing American car

shoppers from sticker shock. So far.

Car prices were supposed to have bolted higher by now, auto

executives and analysts predicted. But that has not happened,

mirroring some other industries where companies have decided to

eat added expenses rather than passing them on to consumers.

The average manufacturer's suggested retail price, or MSRP,

on new vehicles in the U.S. rose less than 1% from mid-March to

mid-August, according to car-shopping site Edmunds.

That restraint from the automakers has carried into this

autumn, as car brands are implementing only modest price

increases as they roll out their 2026 model-year lineups. Car

brands tacked on 3.3% to their average sticker prices in August,

according to Cox Automotive, up from last year's increase, but

in line with historical averages.

But now that it appears many of Trump's tariffs are likely

to stick, carmakers are under growing pressure to raise prices,

analysts and dealers said.

General Motors ( GM ) said it will face up to $5 billion in

gross tariff-related costs this year, while Ford cited a

$3 billion gross hit. The car companies have a few levers they

can pull before burdening customers with that added cost, from

absorbing it internally to asking suppliers or dealers to

shoulder some.

The reticence among car executives to stick customers with

tariff-related expenses reflects the reality that American

consumers might not be able to stomach significant price

increases, after a multiyear run-up in new- and used-vehicle

prices following the pandemic. Average transaction prices have

risen about 30% since 2019, to $49,077, according to Cox

Automotive.

Randy Parker, CEO of Hyundai North America, said the South

Korean automaker is holding firm on pricing to guard against

losing customers to rivals, even though tariff costs eroded the

company's bottom line in the second quarter by about $600

million.

"Our priority remains ensuring that we're competitive

through affordability," Parker told Reuters this month.

Tariff-related costs amounted to nearly $2,300 in added cost

per vehicle in June on an annualized basis, if applied to all

domestic and imported vehicles, according to an analysis from

consultant and former GM executive Warren Browne.

Browne believes that carmakers will begin to raise prices

starting in the second half of the year to protect their bottom

lines, even though those higher prices will dampen demand and

lead to an overall drop in U.S. vehicle sales.

COMPANIES TO RAISE PRICES GRADUALLY

Kevin Roberts, director of economic and market intelligence

at online marketplace CarGurus, also predicts that automakers

will gradually raise MSRPs and focus more on pricier models with

higher profit margins.

Resisting price hikes has allowed companies to avoid blowback

from Trump, who has publicly criticized Walmart ( WMT ),

Amazon.com ( AMZN ) and other companies that have signaled plans

to raise prices to offset tariff expenses.

Automakers in some instances have hiked prices on specific

models, including Ford's Mexico-produced vehicles, some Subaru

models and at luxury brands like Porsche

and Aston Martin.

Automakers also have been subtly passing on some tariff

costs to consumers without direct price increases, analysts and

dealers said. For example, destination fees, which are

essentially the delivery fees to the dealership, rose 8.5% for

the 2025 model year, to $1,507, Edmunds found. This was a much

more significant jump year-over-year than in the past decade.

Mike Manley, CEO of large dealership chain AutoNation ( AN )

, said during a July earnings call that he expects

automakers to maintain competitive pricing on their top models,

and implement minor adjustments across the entire portfolio over

time.

Scott Kunes, chief operating officer of a U.S. Midwest

dealer group, agrees, saying the carmakers do not want to lose

customers to competitors by jacking up prices too quickly.

"There's still a very competitive landscape out there and

market share is so huge to these manufacturers," he said. "It's

going to be very, very gradual."