The on-again, off-again proposed 20% tariff on Mexican manufactured automobiles sold to US consumers could pose huge financial consequences for lower-income car buyers.
A recent study performed by Carjojo, the premier big data company who tracks car sales in real time, finds that 35% of all vehicle models with base MSRP under $20,000 sold in the last six months were manufactured across the US border in Mexico, a significant 5.2% of all new car sales volume in the US.
“It was quite shocking,” says Peter Levy, CEO of Carjojo. “When you consider the demographics of those looking to purchase the most economical vehicles available, the effect of this tariff on prices is quite concerning – not just for our industry but for the financial welfare of those families.”
Carjojo estimates that the tariff would amount to a $2,675 price hike after sales taxes on these Mexican-made vehicles, requiring $3,302 in pre-income-tax income for a working-class family making $27,500 annually. This tariff would amount to a staggering 12.0% of their annual income pre-tax. Even the middle class would feel the pinch, amounting what would be a 5.8% tax increase on car buyers earning the US Median income of $56,500.
“All in all, our study estimates that if this tariff is put in place, at least $1.8 billion dollars annually would be redirected from the pockets of economy car buyers to the government – whether to build a border wall with Mexico or for anything else,” says Levy. “And it would be tough to avoid for even savvy new car shoppers as it would effectively raise the prices across the whole segment substantially regardless of country of origin.”
The following chart shows every car model made in Mexico and sold in the U.S. with a base price less than $20,000. The total sold (volume) is the number of new vehicles sold in the U.S. between August 2016 and January 2017 model years 2016 through 2018.
|Vehicles Manufactured in Mexico||Total Sold (Volume)*||2017 Base MSRP||Estimated Rev|
|Nissan Versa Note||8676||$15,480||$134,304,480|
|Nissan Versa Sedan||31033||$11,990||$372,085,670|
|Toyota Yaris iA||5404||$15,950||$86,193,800|
|Weighted Average Vehicle MSRP||$16,823|
|Estimated Tariff Pass-Through**||0.15|
|Estimated Tariff Cost Per Vehicle||$2,524|
|New Vehicle Sale Price||$19,347|
|Average Sales Tax**||.06|
|Total Additional Cost Including Sales Tax||$2,675|
|# of Working/Middle Class Families Impacted||722,796|
|Annualized Tariff Paid||$1,823,929,764|
*Data does not include corporate, factory, or fleet sales. Also, does not include parts or partial manufacturing.
**Estimates based on a 15% Tariff passed through to the end buyer with a 6% sales tax and a 19% combined tax rate. Median and working class incomes were sourced from Investopedia.
Updated 2 / 16 /2017 : Updated Base MRSPs to reflect base price (no destination) with manual transmission MSRP when available.