Ford Motor Company has publicly anticipated that newly imposed tariffs will have a significant financial impact, estimating they will reduce its EBITDA (earnings before interest, taxes, depreciation, and amortisation) by $1.5 billion this year. This projection reflects the intense uncertainty rippling through the automotive industry as trade tensions and policy changes disrupt global supply chains and cost structures.
Suspending Full-Year Guidance
In response to this unpredictability, Ford took the unusual step of suspending its financial guidance for the year. Previously, the company had forecast EBITDA in the range of $7 to $8.5 billion. Although Ford expressed support for the U.S. administration’s efforts to strengthen domestic manufacturing via tariffs, it acknowledged that these same tariffs would erode a considerable portion of its operating earnings.
General Motors, Ford’s primary domestic rival, recently mirrored this move, freezing both its full-year guidance and a planned $4 billion share buyback. GM’s Chief Financial Officer highlighted that previous guidance excluded any anticipated tariff impacts, rendering earlier forecasts unreliable.
Impact on Car Buyers and Market Behavior
Higher input costs caused by tariffs may soon force automakers like Ford to raise vehicle prices. Analysts questioned how buyers would react to these potential hikes during a recent earnings call. Ford executives appeared confident that consumers would adapt, reporting a notable increase in applications for longer-term financing. CEO Jim Farley indicated that 84-month loans are becoming more prevalent among Ford’s financing options, as customers seek manageable monthly payments—even if it means paying more overall over the loan’s lifetime.
Broader Industry Trends
The context for these changes is challenging. Americans are heavily reliant on auto financing, with over 80% of new cars purchased with loans, and fewer than 20% of buyers paying cash. The median cost of a new car in the U.S. is roughly $48,000—just below the 2022 peak but still elevated—while median U.S. salaries have struggled to keep pace with inflation. In total, Americans held $1.51 trillion in auto loan debt by the end of 2023, with the average loan balance rising to $23,792.
Looking Ahead
As U.S.-China trade tensions continue to shape the global landscape, Ford and its competitors are bracing for further market volatility. For now, Ford expects that consumer demand will hold steady despite rising prices, driven by customers’ willingness to extend loan terms to keep monthly payments affordable. However, the company cautions that a weaker economy could shift these trends abruptly, underscoring the ongoing risks created by the tariff environment.
Tariffs are set to substantially reduce Ford’s EBITDA and have already led to the company suspending financial guidance—a dramatic response to a volatile trade and economic backdrop. The longer-term impact on car prices and buyer behavior will largely depend on evolving economic conditions and whether consumers continue to tolerate higher debt burdens to afford new vehicles.
