The announcement in April by U.S. President Donald Trump that a 25% tariff would be applied to all foreign-built cars and light trucks entering the United States, sent ripples through the global automotive industry. In the U.S., it sent consumer behaviour into a tailspin as cautious car buyers, concerned about the impending impact on prices, accelerated their purchase journey and shopped fast.
The result? What’s become known as the “Trump Bump”: a substantial increase in new vehicle sales, primarily benefitting U.S. centric OEMs, in quarter 2 of this year.
In figures published this week, Ford’s sales rose 14.2% compared to the same period in 2024, 10 times the estimated 1.4% industry increase. General Motors also reported substantial growth, crediting it’s 7.3% sales increase in quarter 2 (and almost 12% increase for the first half of 2025) to an increase in sales of trucks, EVs and demand for its affordable crossover SUVs like the Chevrolet Trax.
Unlike their European counterparts, Toyota and Hyundai’s substantial manufacturing operations and supply chains inside the U.S. also meant they benefitted. Hyundai reported their best-ever first half sales, with a jump of 10% in the first 6 months of 2025 and a 10% increase in Q2. These results stand in stark contrast to that of Stellantis who saw sales in the U.S. drop by 12.8% in the same period with Volkswagen of America reporting a 29% decline amidst what the company describes as a “challenging environment”.
These recent figures also point to an emerging trend in 2025 that the largest automakers by volume in the region – General Motors, Toyota, Ford, Hyundai, Honda – are seeing substantial market share growth while smaller, more specialised brands are losing out or treading water.
A tougher road ahead
While the results this week align with Cox Automotive’s forecast that Q2 new-vehicle sales would increase by 1.7%, year-on-year, they are only due to strong performance in April and May, pre-tariff implementation. Now that the panic buying is over, and with tariffs introduced, the remaining half of the year looks far less rosy for everyone.
Analysts estimate vehicle price hikes in the U.S. of between $2,000 to $15,000 per vehicle, depending on the extent of imported content. North American-assembled models might see increases between $4,000 and $10,000, while electric vehicles (EVs), heavily reliant on imported batteries and electronics, could face surcharges up to $12,200. In particular it’s expected that lower-cost imported models could be significantly affected as consumers struggle to reconcile an “affordable” car with a price tag in excess of $50,000.
In this new climate, automakers are adopting different strategies. Mercedes-Benz has pledged to absorb the 25% tariff on 2025 model year cars, aiming to maintain pricing stability for consumers. Conversely, Ford has indicated that prices could rise if the tariffs remain in place, as the increased costs may be passed on to consumers
One thing is clear, with consumers now so price-sensitive, the quality of experience and services automakers provide will come under even more scrutiny. Connected cars or software-defined vehicles (SDVs), as they’re also known, are a vital strategy for OEMs navigating tariff-driven challenges. The connected car shifts value from hardware to software, helping manufacturers manage costs while offering buyers more long-term benefits.
Counteracting tariffs through connected cars
In this era, where tariffs are disrupting global supply chains and increasing costs for automakers, harnessing the capability of the software-defined vehicle is critical. Doing this means OEMs can extend vehicle lifespans, reduce costs and generate new revenue opportunities.
- Remote updates for longer lifespans: With SDVs, vehicles can receive over-the-air (OTA) updates to add features, fix bugs and enhance performance — all without changing the hardware. This extends the useful life of a vehicle and justifies a higher initial price.
- More features without more hardware: Tariffs make importing physical parts expensive. Connected cars reduce the need for these components by enabling features via software instead — from heating seats and navigation to infotainment. This shift cuts costs and allows automakers to deliver premium experiences without additional hardware.
- Offsetting margin pressure: With margins set to shrink due to tariffs, the software-defined vehicle (SDV) provides new revenue streams through subscriptions, feature unlocks and post-sale upgrades. By embracing the software-defined vehicle, automakers are transitioning from one-time sales to recurring income.
- Supply chain flexibility: Connected cars depend more on centralised software and less on imported parts, lowering supply chain risks. With fewer hardware variants needed, production becomes simpler and more resilient to trade disruptions.
- Better resale and retention: SDVs retain value better because they stay updated and functional over time. Some even allow software features to be transferred to new owners, increasing residual value in a high-price market.
However, this multitude of benefits that the software-defined vehicle delivers can only be achieved though automotive connectivity. It is the bedrock of the connected car. Connectivity must also be smart, seamless and secure if automakers want to gain the agility and operational efficiency they expect from the software-defined vehicle.
As tariffs increase building and buying connected vehicles will help automakers maintain profitability while giving consumers a smarter, longer-lasting investment. They’re the solution to navigating a tougher, tariff-constrained automotive landscape.
Learn more about how automotive connectivity can help you harness the potential of connected cars with Cubic Cloud.
