Background on the Impacted Parties
North America, comprising Mexico, the United States, and Canada, is bracing for a significant reduction in automobile production and sales due to recent US tariffs. This region, which accounted for 16.1 million vehicle units produced in 2024 according to the International Organization of Motor Vehicle Manufacturers (OICA), is expected to see a decrease of almost 1 million vehicles by 2025, representing a 5.6% drop in production.
Impact on North American Automotive Industry
S&P Global Mobility, an international consultancy firm, estimates that the US tariffs will lead to a substantial reduction in vehicle production and sales forecasts for various regions. Specifically, Norteamérica’s light vehicle production is projected to fall by 944,000 units in 2025 and by 778,000 units in 2026.
Mexico exports over 80% of its annual vehicle production to the United States, making it heavily reliant on cross-border assembly lines. Companies like Stellantis, Audi, and Volkswagen have already paused production due to these tariffs. Furthermore, Mexico is the primary supplier of auto parts for the US market, accounting for 43% of car components.
The ripple effect of these tariffs extends beyond North America, impacting Japan, South Korea, and Europe. An estimated reduction of around 160,000 annual units is expected in Japan and South Korea. Meanwhile, Europe anticipates a decrease of 12,000 units in 2025 and 251,000 units by 2026, largely due to US tariffs on vehicles and parts.
Global Implications
The ongoing trade dispute between the United States and China is causing significant challenges for automotive exports and consumer confidence, leading to a projected production of 30.5 million vehicles in 2025—a 1.4% decrease from 2024.
Beyond reduced production, the implementation of these tariffs is expected to slow down product development and delay future product launches.
Key Questions and Answers
- What is the expected reduction in North American auto production by 2025? Almost 1 million vehicles, representing a 5.6% decrease in production.
- Which countries will be significantly affected by these tariffs? North America, Japan, South Korea, and Europe will experience notable impacts.
- How will these tariffs influence auto part suppliers? Mexico, being the primary supplier of auto parts for the US market (43%), will be heavily affected.
- What are the projected changes in vehicle production for other regions? Japan and South Korea anticipate a reduction of approximately 160,000 annual units, while Europe expects a decrease of 12,000 units in 2025 and 251,000 units by 2026.
- What additional consequences will these tariffs have on the automotive industry? Slower product development and delayed product launches are expected.
