It's hard to determine the impact on a dealership service department's bottom line of the Trump administration's tariffs on auto parts imports.
A 25 percent tariff on an imported automotive-brand replacement part will not necessarily lead to a similar price increase in what the dealership pays for the part.
That price will depend on the type of contract an automaker has with a supplier. The manufacturer may have an agreement to buy a part at a set price for a certain period.
In such cases, "most of the OEs are saying that is the supplier's problem" to absorb the cost of tariff increases, says Paul McCarthy, president of the Automotive Aftermarket Suppliers Association, a division of the Motor & Equipment Manufacturers Association.
An exception occurs when a manufacturer directs a supplier to source from China, McCarthy notes.
"Those parts have seen a price increase" because of the tariffs, he says. But even then, he adds, the cost to the end consumer likely won't be 25 percent higher.
The impact of even a 25 percent tariff can be relatively small, given the difference between the price of producing a part in China and the final retail price charged for it in the U.S.
The tariff is often based on the price of the part in China, not the price the U.S. consumer pays, says Dan Collins, vice president of sales and engineering with Neotek Co., a Taiwanese maker of brake rotors and drums that produces original and aftermarket parts in China.
Dealers can charge as much as 400 percent more for a part than what it cost to produce in China, Collins says. For example, a windshield wiper can cost $1.50 in China. "What is 25 percent on top of $1.50?" he says.
But, Collins adds, much depends on the part and the margin the importer charges. For a high-dollar part such as a wheel bearing, he notes, a 25 percent tariff could add a substantial amount to the cost.
McCarthy warns that some percentage of the 25 percent parts tariff will eventually begin to be passed on to consumers, and some of them may defer maintenance as a result.
"If over time this makes repairs more expensive," he says, "will we see a downturn in the number of repairs done?"
