How Fleet Managers Can Prepare for the Proposed Auto Tariffs
By Suresh Rajapakse June 10, 2019
The U.S. auto industry has been pulled in a variety of directions as the Trump administration threatens multiple tariffs that would directly impact markets.
On May 17, fleets learned they’ll need to wait six more months before finding out whether tariffs will be placed on imported vehicles and auto parts. Shortly after on May 30, the Trump administration announced a 5% tariff on all goods imported from Mexico—beginning mid-June. As of June 10, the administration retracted these tariffs.
While Wheels doesn’t predict too much impact for fleets with the steel and aluminum tariffs already in place, we understand how these new proposed fees could present concern.
As the threat of compounded expenses looms near, what’s a fleet manager to do? Perhaps invoking a familiar adage is well-suited at this time: Hope for the best, plan for the worst.
Here are some ways a fleet manager can prepare for the proposed auto tariffs.
Talk to your fleet management company
Market fluctuations may be inevitable, but stressing over them doesn’t have to be—especially when you have a fleet management company (FMC) in your corner. If the auto tariffs do take place and OEMs pass on the expense to car buyers, your fleet consultant can help advise a plan to deal with the change in costs accordingly. Your FMC should proactively advise you of the changes and forecast price fluctuations. But it’s also good to take a proactive role to ensure all your concerns are addressed. So, ask questions often.
Keep your ear to the ground
The impact to fleets for any proposed auto tariffs is an indirect one. Meaning there’s a chance they may not affect your organization. It all depends on the decisions of the OEMs and upfitters impacted. If your fleet favors a particular vehicle manufacturer, you can read what public statements they’ve made about the proposed tariffs to shed light on their plans.
For example in June 2018, GM said the tariffs could “lead to a smaller GM, a reduced presence at home and abroad for this iconic American company, and risk less – not more – U.S. jobs.” While that’s not good news for the U.S. economy, it doesn’t hint at immediate price hikes for auto buyers. They are considering absorbing the expense, which would impact operations. How do those decisions funnel down to fleets? Your FMC will have a direct line to OEMs and can ascertain those details on your behalf.
On the other hand, consultancy LMC Automotive believes the auto industry can initially absorb the 5% tariff on Mexico goods but if a full 25% tariff is instituted, automakers will unlikely be able to continue without altering operations.
Keep upfitters in mind
As you plan ahead on making adjustments for the proposed tariffs, don’t forget to keep upfitters in mind. Act now if there’s a possibility to adopt some creative solutions that will save your organization costs, like purchasing materials ahead of time or scaling back the footprint of the vehicle to reduce use of raw materials, which can make an impact on overhead expenses.
Have a specific question on how these tariffs can impact your fleet? Contact Wheels, today.