In today’s episode of Inside Automotive, host Jim Fitzpatrick is joined by powerhouse trio: Geoffrey Pohanka, NADA board member and chairman of Pohanka Automotive Group; Cameron Johnson, chairman and CEO of Magic City Auto Group; and Dan Banister, owner of Banister Automotive. In this insightful conversation, they delve into the impact of President Trump’s tariffs on the automotive industry and discuss the immediate and long-term consequences. They also address how dealers can prepare themselves to move forward.
Pohanka acknowledges that the tariffs have caused significant disruption in the marketplace. He emphasizes that while the strategy behind the tariffs may not be clearly communicated, they are part of a broader long-term economic plan. Johnson agrees, stating that his primary focus right now is on stabilizing inventory and reassuring both customers and employees.
One of the most immediate effects of the tariffs is their impact on the used car market. Higher tariffs on imported parts and vehicles mean rising costs, which trickle down to consumers. Those needing repairs, replacement parts, or new vehicles will inevitably face price increases. Banister points out that affordability remains a pressing issue, as rising sticker prices are compounded by high interest rates.
Currently, approximately three million vehicles sit on dealership lots across the United States. Since tariffs apply only to new imports, the prices of vehicles already in the country remain unaffected for now. Johnson expresses relief that many manufacturers have a healthy supply of inventory, which can help dealers navigate the initial shock. However, if tariffs remain in place long-term, the cost of restocking new vehicles will climb, potentially slowing sales and dampening consumer demand.
Pohanka highlights that the administration is working to counterbalance these effects by addressing energy costs and interest rates. If successful, these efforts could mitigate some of the economic strain caused by rising vehicle prices. Nonetheless, dealers are already adjusting their strategies, reassessing pricing models, and looking at ways to maintain profitability while ensuring that their inventory meets consumer expectations.
Pohanka believes the tariffs serve as leverage to negotiate better trade agreements, ultimately aiming for a more balanced playing field in global commerce. While acknowledging the short-term pain for dealers and consumers, he argues that long-term benefits could include stronger domestic manufacturing and job growth in the U.S. auto sector. However, this transition won’t be seamless, and dealers will have to adapt quickly.
Banister echoes this sentiment, suggesting that the industry is resilient and has survived major challenges before, including the 2008 financial crisis, the push for vehicle electrification, and the COVID-19 pandemic. He asserts that, temporary or not, the industry will adapt to the new tariff landscape.
A key takeaway from the discussion is the need for increased self-sufficiency in the automotive supply chain. Banister stresses that the pandemic exposed the risks of relying heavily on foreign manufacturing. While lower production costs abroad may seem beneficial, disruptions in supply chains—such as those experienced during COVID-19—highlight the vulnerabilities of outsourcing critical goods. He sees the tariffs as a step toward encouraging domestic production and strengthening the U.S. economy.
Despite the uncertainty surrounding the tariffs, the panelists agree that the automotive industry has weathered storms before and will do so again. While short-term challenges are undeniable, the potential for long-term economic and industry benefits remains a focal point.
"Everyone in the Titanic was safe until they hit the iceberg. This country is headed in the wrong path. We have a budget deficit of $2 trillion with receipts of $4 trillion. That cannot continue forever." – Geoffrey Pohanka
"The car business and car dealers are resilent. We went through COVID, the shift into electrification, the 2008 financial crisis... We've seen it all, and we will always figure out a way to survive. We just need to know the rules of the games, and we'll figure it out." – Dan Banister
"Building a plant doesn't happen overnight and manufacturers need to know if these tariffs are going to be permanent. Then, [they can create] a three-year plan to make a big financial commitment to new plants here. But if it's temporary, then the tariffs didn't have the effect it was supposed to have if this goes away in eight weeks." – Cameron Johnson
