Low-Priced New Cars Are in High Demand, but Tariffs Put Them at Risk
Automakers are scrambling to adjust pricing and plan products amid the industry’s tumultuous tariff situation.
Inexpensive models from automakers such as Ford, Kia, and Nissan are expected to be hit hard by the tariffs.
New-car shoppers want more affordable cars, but they also want more for their money.
The auto industry is suffering an acute case of tariff whiplash, and there’s no cure yet on the horizon. Consumers, meanwhile, are finding some symptom relief in the form of cars priced below the national average, which is currently about $48,000. Case in point: Slate made a huge splash with the unveiling of its under-$28,000 electric truck, which could end up costing several thousand dollars less if the $7500 federal EV tax credit holds up. Of course, that may be on the chopping block as well.
Car companies, many of which have dropped their entry models in recent years, are now faced with addressing the public’s increasing appetite for affordable cars. The timing is a little tough, though, as the cost of parts and production is predicted to be higher than ever. Both customers and manufacturers are watching prices and sales numbers with a bottle of Tums at the ready.
Across the board, automakers are rethinking pricing and product-planning strategies. Nissan announced a few weeks ago that it would be “maxing out” production at its 6 million-square-foot facility in Smyrna, Tennessee. However, that doesn’t include Nissan’s least expensive models, the Versa, Sentra, and Kicks, all of which are currently built in Mexico. The Ford Maverick and Kia K4 are other notably inexpensive models made in Mexico.
This week, Ford said the tariffs will result in a $1.5 billion decrease in projected earnings before interest and taxes; the stock dropped 2 percent on Monday. In a release, the Blue Oval said the risks were “substantial” to the industry, offering the verbal equivalent of throwing up its hands.
“[It makes] updating full-year guidance challenging right now given the potential range of outcomes,” Ford said in a statement. In other words, your guess is as good as ours.
Razor-Slim Margins
Vehicle affordability is a serious issue, according to Ed Kim, AutoPacific president and chief analyst. Automakers have increasingly exited from the affordable-new-vehicle space in the last five years. In the face of tariffs on imported vehicles and parts, new-vehicle prices are set to rise into the stratosphere, further alienating budget-conscious vehicle shoppers.
“Entry-level models typically have very little margin built into them,” Kim told Car and Driver. “During the pandemic, when automakers faced supply disruptions and couldn’t build as many new vehicles as the market demanded, they focused production on more expensive and higher-margin models to make up for the lost sales volume. This caused new-vehicle transaction prices to skyrocket, and most automakers haven’t returned to the affordable-new-vehicle market since.”
In the first quarter of 2025, sales of the Nissan Versa sedan were up 156 percent year-over-year for the quarter. The automaker expects an uptake for the Rogue and Pathfinder SUVs due to pricing reductions across all grades. For now, Nissan dealerships have “ample” inventory at their U.S. retailers that is unaffected by the new tariffs, according to Lloryn Love-Carter, Nissan’s senior manager of corporate communications. Prices on imported models will remain unchanged through at least June 2, she said, while keeping an eye on the impact and adjusting as necessary.
Kia is leaning into the steady success of its K4 sedan, and the Korean automaker has no plans to skimp on features. That said, the model is assembled in Mexico, which is squarely in the crosshairs of the trade war. So far, Kia isn’t flinching.
“Reaching a specific price point can be made easier by simply reducing content, but Kia’s artistry is in providing a high and relevant level of features at very competitive price points. That is a core strength of the Kia brand,” Steve Center, COO and EVP for Kia America, told us. “The new K4 sedan is a perfect example. As one of the few new vehicles in America with a starting price under $22,000, K4 sales have increased every month in a clear sign that value and substance matter the most.”
