*

Automakers may stop selling affordable models, impacting

U.S.

consumers

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Tariffs could add $3,000-$6,000 to vehicle costs, Cox

Automotive

predicts

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Automakers face tough decisions on production and supply

chains

By Nick Carey and Kalea Hall

LONDON/WHITE LAKE, Michigan, March 28 (Reuters) - Major

automakers can deal with President Donald Trump's tariffs on

U.S. auto imports in a number of ways, but all of them lead to

higher prices, fewer choices of models or limits on features for

consumers, industry experts said.

Trump announced 25% tariffs on car and auto parts on Wednesday,

sending global automakers' shares down and raising fears of job

losses in big auto-exporting countries. He says the levies will

ultimately boost production in the United States, but analysts

say the immediate effect will be on automakers' choices that

will hit consumers' wallets.

"Most car makers can't eat 25%, they just can't," said Andy

Palmer, former CEO of Aston Martin. "That means car makers will

pass on as much of the cost of tariffs as they can," including

by removing features to lower their costs while also raising

prices.

Automakers may spread that cost between U.S.-produced and

imported models, cut back on features, and in some cases, stop

selling affordable models aimed at first-time car buyers, as

many of those are imported and less attractive if they carry a

higher price tag.

The changes could price more Americans out of the market.

S&P Global Mobility estimated Thursday that tariffs will cause

annual U.S. vehicle sales to fall to a range of 14.5 million to

15 million in coming years from 16 million in 2024. Cox

Automotive estimates tariffs will add $3,000 to the cost of a

U.S.-made vehicle and $6,000 to vehicles made in Canada or

Mexico without exemptions.

While luxury sellers like Bentley or Ferrari say they will pass

on costs, major automakers' typical margins of 6% to 8% leave

little wiggle room.

Affordable models most likely to be affected include the Honda

CR-V, Chevy Trax, Subaru Forester, Chevy Equinox and Honda HR-V,

said Erin Keating, executive analyst at Cox.

"Car makers know they have certain vehicles in their

portfolio that can tolerate lower profit margins," Keating said.

"Some vehicles may just prove to be too expensive, and most of

those are affordable models manufactured outside the U.S."

After 10% of the car-buying population was priced out of the

market during the coronavirus pandemic, affordability still

remains high on consumers' minds, Keating said.

"Would tariffs bite into another 10% of people who would be

priced out?" she said. "Potentially."

U.S. auto dealers currently have plenty of inventory - about

90 days worth - but prices could start to rise after that. In

recent weeks, Eric Mann, sales manager at the Szott M-59 Jeep

dealership in White Lake, Michigan, 45 minutes northwest of

Detroit, noticed more customers purchasing out of fear of higher

prices.

Loretta Acosta, 55, of Macomb, Michigan, was checking out a

Jeep Grand Cherokee at the Szott dealership on Thursday and said

it "might stink" if car prices rise because of tariffs. "But I

do feel like sometimes stuff stinks, and you got to put up with

it for the betterment of the country," Acosta said.

'EVERYONE HURTS'

European and Asian car makers, deprived of the largest auto

importing market, could cut production. If automakers stop

shipping a model to the U.S., that would translate into lower

production at those factories. Lower volumes mean higher costs

per vehicle, "which ultimately will be passed on to consumers"

in those markets, Palmer said.

On Thursday Jeron Reed, 46, of Warren, Michigan, went to

Matick Chevrolet in Redford, 20 minutes west of Detroit, to

finalize a lease on a 2025 Equinox EV because of the tariff

threat.

"What I'm hearing within the next couple of weeks (is)

prices are probably gonna jump, and they're already high," Reed

said.

Some companies selling U.S.-made cars with a high percentage of

tariff-exempt parts could raise prices to boost profits but

still keep them low enough to take market share from

tariff-affected rivals. Longer-term, major automakers would have

to decide whether to ride out tariffs on a bet that they won't

last, or spend two to three years moving production and supply

chains under the expectations that tariffs would last beyond

Trump's presidency, said Mark Wakefield, global automotive

market lead at consultancy AlixPartners.

"Those ones could be big winners in three or four years if

the tariffs really stay in," Wakefield said. "Or they could be

losers if it somehow unwinds and they're stuck with higher

costs."

Newer automakers like INEOS Automotive do not have that luxury.

The France-based manufacturer started selling its off-road

Grenadier model in the United States early last year at an

average price of around $85,000, said CEO Lynn Calder. INEOS has

since sold 8,000 vehicles in the U.S., or 60% of its total.

"I don't think it's possible to pass a price increase in the

range of 25% onto a consumer," she said. "But equally, it's also

very clear that we can't absorb it all."

She said INEOS will split the burden between the company,

its dealers and consumers, a hybrid solution where "everyone

hurts."