Sam Peterson, a retired account executive from Dallas, was planning to buy an SUV in the Spring when he was back from a three-month stay in the California desert. With tariff-related price increases looming, however, he bought the vehicle while he was still on his trip and planned to ship it to Texas upon his return. “I figured that it would be cheaper to buy it now before the prices went up,” Sam said. “Even with the cost of transporting it back home, I would still be ahead of the game.”
Sam is not alone in accelerating his vehicle purchase—not by a long shot. It is estimated that the “pull-ahead” sales effect related to tariff concerns are approaching half a million units in two-and-a-half months, with 438,000 accelerated purchases occurring from March 1 to mid-May—almost 1 out of 6 vehicles sold in that period. Three segments—Full Size SUVs, Mid-Size SUVs, and Small SUVs—account for more than half of those accelerated purchases (52%), while Heavy Duty and Full-Size Trucks collectively represent another 14%.
While OEMs and dealers are reaping the short-term rewards of this rush, it is not without longer-term risk. Sam’s purchase—along with the 437,999 others that are estimated to have moved up on the calendar—will come at the expense of sales in ensuing months when they would have normally occurred. And if the anticipated price increases that spurred this activity come into reality, the drag on future results will likely be magnified as more consumers get priced out of the market. The impact will be particularly consequential given the profit margins on the SUVs and trucks that are driving this short-term dynamic.
These pull-ahead sales are just one of the risks to the industry related to the tariff situation. OEMs are left with a set of difficult decisions, which all carry financial hazards. Raising prices, as Ford has announced it will do regarding its Mexico production, carries the peril noted above that consumers will flee the market as fast (or faster) as they rushed into it. Other options are equally fraught. Not raising prices forces OEMs to eat the tariff costs at the expense of profits, as GM has signaled to the industry and to financial analysts—to the tune of up to $5B this year alone. A longer-term scenario of production cuts and related job losses may spark an economic downturn that could affect consumer purchasing power even more profoundly.
It looks like the tariffs, which were initially subject to mercurial delays and shifts, are here to stay—at least in some form or fashion. The pull-ahead sales are an early chapter of a book that is still being written. But one thing is clear: the risks to the industry are just beginning. And now that the short-term checks have been cashed, the longer-term invoices look like they will be coming due.
