Why Mercedes-Benz Isn’t Panicking—And Why It Matters
What Elon Musk’s Comments Really Mean
Friends, here’s what you need to know: The Tariff Story Isn’t Black and White—And Mercedes Just Proved It
In our last article, we broke down the widespread impact of the 25% automotive tariff and what it means for every major automaker in the United States—from legacy OEMs to new energy startups. But now, as we dig deeper into the strategic responses by each brand, a more nuanced story begins to emerge—one where manufacturing location, executive leadership, and even brand philosophy start to shape very different outcomes.
Let's continue the conversation by zooming in on a key truth: not all automakers are reacting the same—and some are playing a smarter game.
Why Mercedes-Benz Isn’t Panicking—And Why It Matters
Earlier this week, Mercedes-Benz USA made it clear that it will not pass tariff-related price increases to dealers or customers on MY25 vehicles. Let that sink in: while many other OEMs are still scrambling to understand the impact, Mercedes is confidently holding the line. That decision is rooted in a strategy years in the making.
Mercedes builds a significant portion of its SUV lineup in Tuscaloosa, Alabama. From GLEs to GLSs, these vehicles are not only sold in the U.S. but are also exported globally. Here's why that matters:
Domestic production offsets import exposure. When you’re building high-margin models domestically, you’re less reliant on importing those vehicles from tariff-impacted countries.
Exports create a natural balance sheet hedge. When Mercedes exports U.S.-built vehicles to global markets, it can capture earnings in stronger currencies and use that margin to neutralize inbound tariff costs on smaller-volume European models.
In other words: Mercedes saw this coming. And now, they’re showing their hand—and it’s strong.
What Elon Musk’s Comments Really Mean
Then there’s Tesla. Elon Musk, the master of market disruption, made headlines by urging President Trump to reconsider or slow-roll the tariff implementation. On the surface, that might seem counterintuitive—after all, Tesla builds all of its U.S.-bound cars in America, right?
Not exactly.
While final assembly happens in places like Fremont and Austin, Tesla remains deeply reliant on imported battery cells, raw materials, and power electronics from China and South Korea. A tariff on those components significantly increases costs—especially in an already margin-sensitive EV market. Musk’s pushback isn’t just political; it’s tactical. He knows that unchecked tariffs could slow down Tesla’s price competitiveness just as competition from BYD and Rivian begins to heat up.
What About Everyone Else?
Here’s how the rest of the market stacks up:
BMW: Like Mercedes, BMW produces SUVs in Spartanburg, SC. But with many sedans and smaller models still coming from Germany and Mexico, BMW could see a blended impact less than most, more than some.
Toyota & Lexus: Toyota builds many models in North America, but imports from Japan still represent a large slice of their premium lineup. Expect targeted price increases or incentive restructuring.
Volkswagen: VW has already started issuing import surcharges and hinted at “temporary pauses” on specific trims. Audi, in particular, is heavily exposed due to its German production footprint.
Jaguar Land Rover: JLR has temporarily paused shipments to reassess its pricing structure—a move that could delay inventory and impact dealer operations.
Hyundai & Kia: Hyundai’s Montgomery, AL plant is a key advantage, but their reliance on Korean-built EVs like the Ioniq 5 may push prices higher until North American battery partnerships ramp up.
Stellantis (Chrysler, Jeep, etc.): With strong domestic production, they’re well-insulated—though parts dependencies may raise service and warranty costs.
General Motors & Ford: Both brands are uniquely positioned to win, provided they can manage part costs. Expect them to leverage “Made in America” messaging heavily over the next quarter.
How This Shapes Consumer Confidence and the Dealer Reality
As we've stated, tariffs aren’t just about economics—they’re about perception. If the market believes that prices are about to rise sharply, consumer behavior shifts overnight.
Dealers are already seeing early signs:
Hesitation at the point of sale
More trade-in inquiries
Preemptive CPO shopping
But here’s where the real issue lies: if OEMs raise MSRP but fail to support lease rates or rebates, volume declines. That puts pressure on floorplan, store morale, and your CSI scores.
What Smart Dealers Need to Do Right Now
Mercedes made a powerful statement by not raising prices. But that doesn’t mean every brand will follow suit. Dealers need to:
Communicate clearly: Tell customers what’s happening and why acting sooner may save them money.
Double down on CPO and trade-ins: These are your hedge against inflated new car prices.
Shore up Fixed Ops: Inflation and parts shortages will create delays and frustration—your ability to communicate and deliver premium service is everything.
Watch your labor rate: ELR should be reviewed weekly. If you’re not maximizing technician time and quoting accurately, you’re already behind.
My Forecast: Tariffs Will Reshape the Industry, but Not Break It
The reality is, these tariffs are both real and politically charged. Brands with U.S. production footprints will fare better. Those without will need to absorb, restructure, or retreat. Consumers will adjust, and so will we.
But here’s the key: this isn’t just about surviving it’s about gaining market share. The most prepared dealers and brands won’t just weather this they’ll grow during it.
Stay sharp. Stay agile. Stay educated.