German luxury automaker Audi announced that all vehicles arriving at United States ports after April 2 will be held there rather than being delivered to dealerships and customers. This news comes hot off the heels of 25% tariffs on all imported vehicles, which were imposed by the Trump Administration. Audi will be heavily impacted by these tariffs, since none of the models it sells are built in the US.
The Audi Q5 is built in North America, but in San José Chiapa, Mexico. Since Mexico is part of the United States-Mexico-Canada Agreement (USMCA), which was signed by President Trump in 2020, the Q5 should only be subject to tariffs on non-US content, approximately 98% (based on a 2022 model). Every other model in the lineup is made either in Europe or elsewhere, meaning they will be fully subjected to the tariffs.
Two Months Of Inventory
An Audi spokesperson told Reuters it has around 37,000 vehicles currently in inventory, which is enough for approximately two months of sales. After that, dealers will run out of vehicles to sell. Current inventory should not be subject to tariffs, though limited supply could cause dealers to charge “market adjustments.” Anyone who shopped at the height of the pandemic during the microchip shortages remembers that dealerships took advantage of the situation to raise prices.
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Even Ferrari Is Going to Raise Prices Due To Tariffs
Odds are, most buyers will be able to handle the extra cost.
Not only will Audi pause vehicles that have already arrived at port, but it will also cease shipments to the US until further notice. That means even if the company reverses this decision, there will likely be a supply shortage sooner or later. This situation comes at a terrible time for Audi, just as the brand planned a new product onslaught with vehicles like the Q6 e-tron, Q5, and A6.
What’s Next?
The Trump Administration believes that tariffs are useful in bringing auto manufacturing back to the US, but little evidence has been provided to support these claims. For a company like Audi, which doesn’t currently build any vehicles in the US, it would require the construction of a factory to avoid tariffs. Not only does that take years plus millions (or billions) of dollars, but it doesn’t begin to factor in supply chains, which aren’t as easy to move.
Assuming all goes well, and Audi could build a factory somewhere in the US, it could all be a wasted investment if the Trump Administration changes course on the tariffs or the next president reverses them. We’ve already seen the short-term impact these tariffs have on the automotive industry, and the long-term effects could be more severe.
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