February is upon us, and with it a familiar but unwelcome theme for the auto industry: uncertainty.
That’s thanks to President Trump’s rapidly evolving move to implement 25% tariffs on imports from Canada and Mexico, aka some of the US auto industry’s most important trade partners.
Several automakers turned in strong sales reports for January, boosted by growing sales of EVs and hybrids. But the industry at large, including the EV sector, has its attention squarely set on trade policy and how it’ll affect their bottom lines.
Electric numbers: Hyundai reported its best-ever January sales in the US, up 15% YoY, fueled by a 41% gain for electrified models. The brand’s hybrid sales jumped 74%, while sales of battery-electric vehicles grew 15%.
Sister brand Kia also posted record January sales, up 12% YoY. The brand’s electric EV6 posted 27% sales growth from a year ago, though EV9 sales were down 14%.
The Honda brand reported record electrified vehicle sales of 29,762 units, primarily driven by the success of hybrid models like the Accord and CR-V. And although Ford’s sales dropped 6.3% in January, its EV and hybrid sales were up 21% and 19%, respectively.
Analysts forecast a relatively strong sales month, with plenty of asterisks due to uncertainty about federal policy. In a press release, Cox Automotive estimated that January sales would be up 5% YoY. Analysts expect new-vehicle sales “to continue to improve modestly in 2025,” but said that “policy changes regarding tariffs and electric vehicle tax credits from the Trump administration could have negative effects on the outlook, particularly in the second half of the year.”
Tariff this, tariff that: US consumers already are facing affordability challenges in the new-vehicle market; JD Power pegged the average price of a new vehicle at nearly $45,000 last month. Now, experts largely agree that auto tariffs will drive up prices even more.
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That’s because automotive supply chains between the US, Canada, and Mexico are extremely intertwined thanks to decades of free trade.
Canada and Mexico build about 5.3 million light-duty vehicles annually, 70% of which are destined for the US, according to S&P Global Mobility. In 2024, 15% and 7% of US light-vehicle sales were produced in Mexico and Canada, respectively. GM, Ford, and Stellantis respectively sourced 22%, “just under 15%,” and 23% of their US sales from Mexico last year, but S&P noted that “virtually all automakers and suppliers would be impacted.”
EV sector leaders have cause for concern, too. Rivian CEO RJ Scaringe recently said he’s even more concerned about tariffs than the possible end of federal EV incentives. “Many, many, many hundreds of billions of dollars have been invested in Mexico in production capacity for supply chains that supply to all of us,” he said, per InsideEVs.
Albert Gore, executive director of EV trade group the Zero Emission Transportation Association, warned that the tariffs would “increase costs to consumers” and argued that “using trade policy to create political leverage risks giving China greater trade leverage around the world.”
S&P Global estimated that a 25% tariff on a $25,000 vehicle built in Mexico or Canada would add $6,250 in costs that would likely be passed on to consumers.
“The only certainty at this point is that, if implemented as proposed, these tariffs will drive up costs for consumers,” Jessica Caldwell, Edmunds’ head of insights, said in a statement. “This will be a tough pill to swallow for American car shoppers already grappling with rising vehicle prices and persistently high interest rates, which the Federal Reserve left unchanged last week.”