Photo credit: www.cnbc.com
Drone footage captured trucks navigating U.S. Customs after crossing from Tijuana at the Otay Mesa port in San Diego, California, illustrating the ongoing flow of trade along the U.S.-Mexico border.
As President Donald Trump’s anticipated 25% tariffs on imported vehicles were about to take effect, Ford Motor Company executives found themselves in a challenging predicament, searching for effective strategies to mitigate the impact of these new regulations.
In response, Ford swiftly introduced an employee pricing initiative dubbed “From America, For America”, aimed at American consumers. This decision sought to support U.S. operations, which represent the largest domestic production footprint in the automotive sector, while also addressing consumer hesitation amid economic uncertainty linked to the tariffs.
Employee pricing programs often evoke mixed reactions, as they tend to sell vehicles at prices close to or below dealer invoice costs, consequently squeezing profit margins for retailers. Nevertheless, Ford deemed this initiative vital to stimulate sales during a period marked by consumer apprehension and financial unpredictability.
“We recognize that these times are challenging for many Americans — whether due to economic complexities or the need for trustworthy transportation for their families, we are here to help,” Ford stated in its program announcement. “Our extensive retail inventory provides numerous options for customers seeking a vehicle.”
This move exemplifies how certain automakers are striving to find “opportunity in the chaos” or to seize the moment amidst the controversial tariffs, as various industry analysts conveyed to CNBC.
Ford dealer Marc McEver, owner of Olathe Ford Lincoln near Kansas City, Kansas, expressed enthusiasm for the initiative, stating, “I absolutely love it. I think it’s going to drive sales. It’s exciting to witness Ford stepping up to lead this program. … It’s a genuine offer for customers.”
A day before the tariffs were enforced, Ford informed its dealers about the pricing initiative, which will remain in effect until June 30. The announcement was made just hours after the tariffs were imposed, reflecting Ford’s agility in navigating the situation.
Prior to the onset of tariffs, Wall Street analysts largely regarded Ford as one of the better-positioned automakers due to its significant U.S. production capabilities, particularly in the truck segment.
Ford’s stock performance has held steady compared to rivals; it ended the week down 1.4%, while Stellantis, the parent company of Chrysler, faced a more dramatic drop of 14.2%, and General Motors experienced a 5.4% decline.
In alignment with Ford’s strategy, other manufacturers are also launching similar initiatives in response to rising vehicle prices and profits that have escalated since the COVID-19 pandemic. Stellantis introduced its own employee-pricing program, whereas Hyundai announced that it would not increase prices for at least two months to alleviate consumer fears.
According to Erin Keating, executive analyst at Cox Automotive, these moves make strategic sense. She noted that Ford and Stellantis, despite having roots in Europe, reinforce their image as “domestic” companies and are better positioned to address current market demands while managing inventory levels that include older models.
“Creating room for new vehicles and striving to maintain market share is a logical approach,” Keating asserted. “Those who can offer competitive pricing amidst current demand will likely retain market shares longer than competitors who are not as responsive to customer needs.”
Ford and Stellantis brands, including Ram Trucks and Jeep, are reported to have some of the highest inventory levels within the auto industry, according to Cox Automotive.
This week, Stellantis and Ford reported notable declines in first-quarter vehicle sales, with Stellantis experiencing roughly a 12% drop and Ford declining by 1.3% year-over-year. The average days’ supply of vehicles nationwide stood at 89 days, yet these brands are grappling with inventory levels ranging between 110 to 130 days. Traditionally, the auto industry considers a healthy inventory supply to be between 60 to 80 days.
Amid fears of price hikes influenced by the tariffs, vehicle demand has surged. With the confirmation of the tariffs, consumers flocked to dealerships at the end of the previous month, resulting in significant sales increases for various automakers.
March sales figures released by Cox Automotive indicated that new-vehicle sales soared to approximately 1.59 million units, greatly surpassing predictions and marking the best sales month in four years.
“The last week, and the preceding weekend, proved to be one of the best we’ve seen in a long time,” remarked Randy Parker, CEO of Hyundai Motor North America, during a media call. “In the rush to secure vehicles before the tariffs took effect, many consumers acted decisively.”
This immediate strategy to sell now, in light of uncertain future sales, may also serve as a safeguard against a potential U.S. recession. J.P. Morgan raised the likelihood of a U.S. and global recession from 40% to 60% by the year’s end.
Keating emphasized the importance of current consumer incentives, stating, “Given the pressing demand, it’s wise to capitalize now before the possibility of a recession impacts sales adversely.”
Source
www.cnbc.com