Tariffs are a “direct hit on fleet budgets and procurement strategies”

On March 26, President Trump signed an executive order to impose a 25% tariff on all imported cars and certain parts in a bid to address “a critical threat to U.S. national security.”

US fleets will initially bear the brunt of the 25% tariffs on imported cars, light duty trucks and replacement parts. The import duties will push up new vehicle prices and inflate service, maintenance and repair budgets.

But the tariffs could also destabilise residual values in both the US and Europe, depending on manufacturer reactions.

Direct hit on flee budgets
Selinay Parlak, Co-Founder of EV consultancy Bluedot, described the US’s trade war with the rest of the world as: “a direct hit on fleet budgets, procurement strategies, and EV transition plans.”

Total cost of ownership models need to be rebuilt, she said, aging vehicles might look more valuable than brand-new imports, and EV timelines may need to be reprioritised.

A number of European fleets will have recently gone through this process after the European Commission last year announced its own provisional import duties on electric vehicles made in China. The tariffs imposed by the EC, which range from 7.8% to 35.3%, have yet to manifest themselves in list prices, although they may have impacted transaction prices through lower levels of discounting and purchase incentives.

OEM reaction
The challenge for fleet decision makers lies in forecasting how vehicle manufacturers will react, as well as the consequences of their actions on the used car market.

Last year, the US imported 757,654 vehicles made in the EU, accounting for 22% of the bloc’s new vehicle production. Almost 170,000 new vehicles sailed the other way, including some of the larger SUVs made by Audi, BMW and Mercedes-Benz in the US. These imports to the European Union are already subject to 10% tariffs, and the EC is currently consulting on potential increases that would drive up costs for fleets in Europe.

Paul Holland, Managing Director for UK/ANZ Fleet at Corpay, said the tariffs could prompt manufacturers to redirect their new vehicle production to other markets, restricting fleet operators’ ability to procure specific vehicle models.

“Fluctuations in vehicle prices and market dynamics may impact the residual values of fleet vehicles, complicating financial planning and lease agreements,” he said.

Replacement cycles
With potential supply shortages and price rises on the horizon, Steve Jastrow Senior Vice President, Strategic Advisory & Analytics, Element, advised fleets to plan vehicle replacements carefully.

“Target high-mileage vehicles or those with the highest operational impact for replacement first,” he said.

Jastrow also urged fleet procurement teams to diversify their OEM agreements in order to avoid over reliance on one supplier, and to prioritise US-made models.

“With shifting tariffs and international trade policies, prioritising vehicles manufactured predominantly locally can help organisations reduce their exposure to unexpected costs,” he said. “By focusing on domestic alternatives, companies can avoid tariff-related price hikes and ensure more predictable budgeting for fleet procurement.”

Granular understanding
In the short term, some manufacturer groups, such as Ford and Stellantis, have offered customers price protection, but these offers are unlikely to be permanent, which adds a degree of urgency to fleet procurement decisions.

Fleet professionals will even have to gain a more detailed understanding of the components of the vehicles they acquire, with US-assembled vehicles that contain higher percentages of US-Canada-Mexico made parts set to face lower tariffs.

Service, maintenance and repair
But in the aftermarket, replacement parts and components, including common items such as batteries, tyres and brakes, will be subject to import duties of 25%, inflating fleet service and maintenance costs, and underlining the need for a forensic analysis of replacement schedules. Defleeting vehicles that are forecast to require significant maintenance spend could protect fleet budgets and avoid downtime due to parts shortages.

Residual values
Linked to this process is the need for a granular investigation of used car values, converting volatility into opportunity, said Zach van de Lagemaat, Business Development Manager, Element. A shortage of new vehicle supply in the US, for example, could drive up residual values as private consumers switch from the new to the secondhand market for their next cars.

“The [US] used vehicle market is thriving like never before. With values and demand both surging, you’re in a rare position to gain, if you move strategically,” said van de Lagemaat. “Rising demand for affordable alternatives has created a seller’s market, making this a golden moment for fleet remarketing.”