Toyota will need to sell its top-selling models at $3,000 higher than their initial sticker prices amid fears on long-term impacts of the ongoing US-China trade war. This was mentioned after Toyota reported record profits on Aug. 3.
Toyota has 10 production plants in the United States where it produces less than half of all the cars it sells in the country. Still, the company is making itself ready for the possible increase in U.S. auto import tariffs just like its global competitors.
The Toyota Camry sedan, which is being assembled in Kentucky, will be sold $1,800 higher if a 25 percent tariff takes effect. The full-size pickup, the Toyota Tundra, will be sold $2,800 pricier while the Toyota Sienna minivan will be sold $3,000 higher.
"A 25 percent tariff on automotive imports, which is just a tax on consumers, would increase the cost of every vehicle sold in the country," Toyota said in a statement provided to CNBC.
Toyota is also worrying about possible tariffs on exported cars. The company has approximately 709,000 vehicles shipped to the United States from Japan in 2017, according to an estimate from Reuters. For this number alone, the Japanese automaker can be hit with an annual tariff amounting to $4.25 billion. Toyota, for the meantime, hopes for a stronger yen to offset whatever damage the US-China trade war may bring to its global sales.
The looming higher car import/export tariffs will affect all major car makers globally, as suppliers are also affected. Rebecca Lindland, a senior analyst for Kelley Blue Book, said automotive supply chain might also increase prices because car parts are also imported and exported to different locations across the world. This will also set a ripple effect toward dealers, mechanics, and customers, Lindland predicted.
Indeed, Denso Corp, one of the world's biggest car parts suppliers, said possible tariffs could slash off up to $720 million from its annual profit. Ford, General Motors, and Fiat Chrysler had lowered their full-year profit forecasts amid fears that trade tensions can hurt sales and profit margins.
BMW announced that it would start selling the BMW X5 and X6 SUV models by 4 percent to 7 percent higher in China effective July 30. The increase in price shall cover the additional cost of tariffs incurred after China imposed duties on about $34 billion of U.S. imports.
Subaru has reported a dip in sales in the United States and continued to predict that there will be more significant impact ahead.
Meanwhile, if the exchange of words between China and President Donald Trump is anything to go by, the trade war will persist and linger. There is no sign of stopping in the immediate future.
"The trade war will remain in place regardless of how much the Chinese cave in. [Tariffs] are working far better than anyone ever anticipated," the president said. He firmly believed that the U.S. market would improve dramatically once trade deals are renegotiated.
China, on the other hand, was also firm in saying that it will endure the war on trade.