When President Donald Trump said he would add new taxes, called tariffs, on cars and parts from other countries, many car companies were afraid. They thought their profits—their bottom line—would fall fast.
Most carmakers bring parts, and even whole cars, into the United States. At first, they expected the 25% tariff to cost them billions of dollars each year.
Soon after the plan started, the government began to cut some of the new taxes. Because of this, the real cost was smaller than first feared.
General Motors lowered its cost estimate by half a billion dollars. Ford cut its expected cost for 2025 from two billion to one billion. Even companies from Europe and Asia handled the change because they already build many cars in American factories.
Experts say a future trade deal with Canada, Mexico, or South Korea could reduce costs even more.
Another big change helped carmakers save money. In July, a new law removed fines for not meeting pollution rules. Before this, companies had to buy special credits from cleaner makers like Tesla.
Without the fines, building a vehicle now costs about three to five percent less. Companies can also sell more large trucks and SUVs, which bring in higher profits.
So far, carmakers have not added the full tariff cost to the sticker price. Still, the average new car now costs about $50,000, around 4% more than last year.
Some companies charge extra for features that were once free or stop making less popular models. Even with these moves, experts say the industry is in better shape than most people expected in March.