Too Many Moving Parts
‘Fascinating.’
That’s the first word Ben Sullivan, chief operating officer at Balise Motor Sales, used to describe the current landscape for the auto industry, and especially dealers, as tariffs of some kind, involving some countries and some products, loom over the sector.
He would use many others, especially ‘uncertainty’ and ‘volatility,’ terms that explain why, by and large, the large Balise stable of dealerships across Western Mass., Connecticut, and Cape Cod isn’t really doing much of anything at this point in response to what’s happening and is conducting what could be described business as usual.
That includes refraining from use of ‘beat the tariffs prices’ advertisements and similar messages that many others have deployed — although they’ve been discussed.
“We just didn’t think we had enough clarity to do that,” Sullivan said, hitting on just how much uncertainty exists today. “If we’re going to say something to our customers, we have to make sure that we’re on solid ground. We absolutely stayed away from creating any kind of frenzy around these things because we just don’t know if it’s true or not.”
But while it’s business as usual in some respects, dealers are certainly doing more business than usual for this time of year.
“Consumers are getting smart when it comes to how to manipulate the market and take advantage of the best opportunity and time to upgrade their vehicle and learning how to really maximize their equity.”
Indeed, while Sullivan said sales in March and April were up 24% over that same period a year ago, Carla Cosenzi, president of TommyCar Auto Group, which has five dealerships in Hampshire County, put the number at more than 30% across all brands, with Hyundai and Volkswagen leading the way.
“We’ve seen a surge in consumer urgency — they’re trying to get ahead of the potential tariffs,” she said. “And, right now, incentives are still good — there are a lot of low APRs available for consumers across the board — and their trade values are worth more than now than they were a month ago or two months ago. That combination is driving a sense of urgency.”
Other impacts include:
• An increase in leasing, as consumers in need of a new car survey the situation and see that option as a way to get a decent price and buy themselves some time until there is more clarity on what will happen long-term, or at least longer-term;
• With uncertainty about new cars, marked growth in demand for used cars, with prices holding generally steady, at least for now, said Cosenzi, adding that this demand translates into those higher trade-in values she mentioned; and
• A similar increase in demand for service contracts as consumers read and hear about how the prices of parts might be soaring as well due to tariffs.
“Consumers are getting smart when it comes to how to manipulate the market and take advantage of the best opportunity and time to upgrade their vehicle and learning how to really maximize their equity,” said Cosenzi as she surveyed the landscape and what’s she’s seeing from her front-row seat regarding all of the above.
Ben Sullivan says there are too many variables and unknowns to say with any kind of certainty what the short and long term look like for auto dealers.
As for what comes next … well, that’s where uncertainty takes over, especially with headlines changing seemingly every week, or even every day, on the levels of tariffs, possible exemptions, new deals with countries — such as the 90-day truce recently struck with China — and possibly individual manufacturers, and more.
“Nobody’s making major adjustments — the manufacturers are not making wild swings in what they’re doing because the landscape is changing almost by the day,” said Sullivan, who drew a parallel to the recent run on iPhones, a surge that quickly abated when it was announced that there would be exemptions on those products, but then picked up again when it was announced that the chips inside them would not be exempt.
“Overall, I don’t believe the tariff news will end up being as bad as we fear or as good as we hope,” said Sullivan as he summed things up, adding that it is simply too soon to know what will happen in the months and years to come.
Cosenzi agreed, noting that, beyond prices, inventory will be something to watch. Availability will likely become more limited, she said, adding that the great unknowns are when and to what degree this will happen.
“It’s too soon to really know, and it depends on the brand, but we’re starting to see that slowdown with brands like Volvo and VW,” she noted, adding that she doesn’t know if these cars are still in Europe or at the dock waiting for the smoke to clear. “It’s really complicated right now, and it’s very gray, so it’s hard for us to give consumers a clear picture.”
‘Fascinating.’ ‘Complicated.’ ‘Volatile.’ ‘Gray.’ These are the adjectives that describe the current state of the auto sales market, and it appears they will prevail for some time.
Driving Forces
March and April are traditionally not big months in the auto industry, said those we spoke with. They’re not bad months, necessarily, but they’re not like February (the real start of the sales season), end of year, or even some summer months, when there are usually deals to be had.
But this year was, of course, different.
With the coming of President Trump’s Liberation Day and news reports of car prices rising several thousand dollars as a result of traiffs, consumers took the initiative and found not only locked-in prices, but some incentives as well, said Cosenzi, adding that demand has been steady across the board, brand-wise, with small to mid-sized SUVs still dominating sales. Overall, the trend continues even as the rhetoric on tariffs continues to soften.
“When you back it up and look into an industry like ours with a truly global supply chain, it is nearly impossible right now to determine all of the impacts.”
Some of these buyers needed a new car, she said, but most were trying to beat the clock when it comes to expected price hikes and reduced availability.
“They may not necessarily be in the market for a new car, but they’re saying, ‘I might as well take advantage of the market conditions and upgrade sooner rather than later,” she explained, adding that this surge speaks to still-high levels of confidence in the economy.
Meanwhile, some manufacturers are price-protecting until the end of May and June in some cases, which provides even more incentive to buy now.
“If someone is in the market for a new car or coming up to be in the market, this is the perfect time to purchase,” said Cosenzi, adding that, while no one has a crystal ball and can say what the landscape will look like in six months or even six weeks, it is unlikely that it will look as good as it does now for consumers.
So, for now, it is still business as usual, and more of it. The overriding question is for how long. And no one really knows.
There are too many variables, especially when it comes to the impact on the thousands of parts that go into a vehicle, how many times these parts cross boundaries, and, thus, how many times they may be subject to a tariff.
“When you back it up and look into an industry like ours with a truly global supply chain, it is nearly impossible right now to determine all of the impacts,” Sullivan said. “A car might be assembled in Alabama, but there are parts from all over the world. And some of those things start as a small part, get put into an assembly, they cross the country border, get into the next stage of development … some of these assemblies might cross a country border seven times. So, if the tariffs become stackable, it would be devastating to consumers.”
Which explains the surge in new-car and used-car buying in March and April, but also the increases in leasing and service contracts as consumers digest the news and look to beat some worst-case scenarios with regard to both pricing and availability.
“With the tariffs, inventories will start to tighten, and consumers want to get ahead of that,” Cosenzi said. “They don’t want to be in a situation like the one they were in with COVID, where if they wanted a car, they really had to sacrifice what they were looking for in terms of color or trim.”
Carla Cosenzi says March and April were much busier than normal amid tariff and inventory concerns, and that trend is continuing.
While this is certainly a good time to buy, and many consumers are, Sullivan said Balise has been reluctant to encourage consumers to buy now because of the high levels of uncertainty and the pace at which the landscape is changing.
“Most industry analysts say the average car price could go up by between $4,000 and $15,000 if all this comes to pass,” he noted. “There will certainly be some cost increase, but I don’t think it will be as severe as people fear at this point. But there is so much that is not known.”
Dealers are already seeing swings in consumer activity, he went on, adding that, while April was a very strong month for Balise, by late April, as the headlines started to reflect a softening of tone on tariffs, the pace of sales eased accordingly.
He drew some parallels to the early months of COVID, when news of shortages of paper towels and toilet paper sent consumers into stores for what amounted to panic buying.
It’s not quite like that with auto sales, but there was a similar knee-jerk reaction, Sullivan said, adding that the frenzy, if it can be called that, is already abating.
Bottom Line
Returning to his analogy with iPhones, Sullivan said it provides some appropriate context for any conjecture on what might happen next in his industry.
“You go to bed one night assuming that your iPhone is going to cost $2,000, and the next morning, it’s still going to be $800 to $900 for the top-end models that it was the day before,” he said, adding that the same is likely — not definite, but likely — to be the case with all those mid-sized SUVs on the market today.
But no one really knows.
So dealers have to be ready, willing, and able to adjust on the fly and absorb whatever comes at them, Cosenzi said, adding that, over the past several years, they’ve had plenty of practice at pivoting.
“This is a really challenging industry anyway, so dealers have to be resilient to be able to be in this business,” she explained. “We know how to pivot quickly and adjust to whatever the customers’ needs and demands are, and that’s what we’re doing in these unsettled times.”
That’s what’s needed when there are so many moving parts, literally and figuratively.
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