Tariffs Could Hurt Auto Sales And Advertising

President Trump’s threat of tariffs on imported cars and light trucks is “pretty real” and, if imposed, could result in two million fewer cars being sold next year, said Patrick Manzi, senior economist of the National Automobile Dealers Association, Thursday at the TVB Forward conference in New York.

According to an NADA-commissioned study, the tariffs could increase the price of all vehicles on average by $4,400 and of all imported vehicles by $6,800,” he said. “That’s not chump change. That is a significant price increase. That is one of the reasons we are really worried about it.”

Broadcasters should also be worried as the marketing and advertising budgets of auto makers and dealers are a function of the vehicle sales. The more vehicles sold, the larger the budgets.

Auto advertising typically accounts for about a quarter of stations’ advertising revenue.

NADA currently forecasts that 16.7 million will be sold next year if tariffs are not imposed. But Manzi said if imported cars are priced out of the market because of the tariffs, manufacturers in the U.S. would be unable to meet the demand for that many cars.

“[W]e are capacity constrained in the U.S. Now if every plant in the country is working at three shifts, 150% capacity, we can make 14 million units per year.

“We can’t just go out and buy new assembly plants. That takes three years from the time a decision is made on where the plant is going to be until the cars are rolling off the line.

“And this is all in an environment of extremely low unemployment. So, if it happens it could be bad.”

Manzi spoke on a panel with two others, Joe Cerone, EVP, local investment, Zenith, a media agency that places advertising for automakers and others, and Ken Bracht, director of brand marketing at Audi of America.

Bracht agreed that if the advertising expenditures would fall along with vehicle sales. But, he added, “if it’s a small blip, then some manufacturers might want to chase it, meaning you could see in the short term some people trying to grab share.”

Cerone said tariffs combined with rising interest rates are “very alarming.” If $7,000 is added to the price of a car, “that it going to impact sales and [marketing] budgets as well.”