Automaker Costs: Tariffs and Chips Drive Up Expenses

General Motors forecasts that rising costs for materials and diesel fuel will cost the company as much as $2 billion in 2026. This projection highlights the financial strain facing major American automakers as they navigate increased production expenses. Ford expects a similar year-over-year headwind of about $2 billion from commodities, memory chips, and logistics.

The financial pressure stems from several factors. The Trump administration has imposed additional tariffs on imported steel, aluminum, and copper since 2025. These materials form the structural framework and wiring of vehicles. Copper prices have also risen due to high global demand for electric vehicle batteries and data center infrastructure. Additionally, the average price for a gallon of diesel has hovered around $6.35, just below its September record high, increasing the cost of shipping parts and finished vehicles across borders.

Despite these rising costs, revenue has increased across the sector. General Motors reported a 2.9% rise in revenue, Ford saw a 2% increase, and Stellantis reported a 1% gain. Sales of large vehicles and light-duty trucks have driven these figures. General Motors light-duty truck sales rose 9% over the past year, while Stellantis pickup sales in the U.S. increased by 34%. The average transaction price for a new vehicle reached just over $50,000 in September, near a record high.

Executives attribute the sales strength to consumer resilience. Sherry Ann House, Ford's chief financial officer, stated that customers remain resilient despite higher fuel prices, interest rates, and inflation. Paul Jacobson, General Motors' chief financial officer, noted that maintaining current price levels makes planning for next year more challenging. Antonio Filosa, CEO of Stellantis, described rising prices for memory chips and raw materials as an industry-wide phenomenon that the company must manage.

The end of the $7,500 federal tax credit for electric vehicles on September 30, 2025, has also shaped the market. General Motors reported third-quarter sales down 6% compared to the previous year, citing a smaller EV market. Tesla global sales fell during the quarter relative to the same period last year. However, electric vehicles now account for about 6% of new car sales in the U.S. as of September, a level that has stabilized after an initial drop following the credit's expiration. Hybrid vehicle sales have risen by 27% in the past year as consumers seek fuel efficiency.

Tesla has regained its lead in the U.S. electric vehicle market. The company now holds almost 52% of new EV sales, a share it lost in 2024 and 2025. Ivan Drury, director of industry insights at Edmunds, noted that buyers are defaulting to Tesla as other automakers adjust their product plans. Tesla CEO Elon Musk indicated that the company is focusing on new technologies such as robotaxis and humanoid robots, with capital expenditures nearly double from this time last year.

Musk also suggested a potential merger between Tesla and his rocket company, SpaceX, on an earnings call. He stated that special committees at each company are discussing the idea and that shareholders would need to support such a move. General Motors is right-sizing its EV capacity and aligning production with demand, while Ford plans to offer the Fathom electric truck as a pre-order in early 2027 for under $30,000.

Sam Fiorani, a vice president for Auto Forecast Solutions, said the industry moves at a slow pace between vehicle generations, making disruptions like tariffs difficult to absorb. He expects the Detroit Three to offer more hybrid vehicles in coming years as the transition to fully electric vehicles takes longer than anticipated. Stellantis executives said they would provide more detailed information on these costs in the fourth quarter.