Auto Costs: Detroit Giants Project $2 Billion Hit from Tariffs and Chips

General Motors and Ford are projecting an extra $2 billion in costs this year, a direct result of rising prices for computer chips, steel, and diesel fuel. The two giants, along with Stellantis, released their third quarter earnings on Wednesday, confirming that while top-line revenue is up, the expense side of the ledger is swelling fast.

The numbers show a clear split in the market. Sales of light-duty trucks at GM rose 9% year-over-year, and Stellantis pickup sales in the U.S. jumped 34%. Ford’s F-Series remains a bestseller. Revenue increased by 2.9% for GM, 2% for Ford, and 1% for Stellantis. The average new vehicle transaction price reached just over $50,000 in September, a figure close to a record high according to Kelley Blue Book.

Executives pointed to specific material shortages and policy changes as the primary drivers of the cost increase. Paul Jacobson, GM’s chief financial officer, stated that material costs including chips and diesel would run the company up to $2 billion. He added that GM is still paying about $2.5 billion in tariff costs, a figure lower than earlier forecasts due to refunds. Jim Farley, Ford’s CEO, cited a similar figure, expecting commodities, memory, and logistics costs to create a $2 billion headwind. Antonio Filosa, CEO of Stellantis, noted that higher prices for memory chips and raw materials would be an industry-wide issue.

Logistics costs have also climbed. The average price for a gallon of diesel has hovered around $6.35, just below the all-time high set in September, according to AAA. This impacts freight costs for moving vehicles from factories to dealerships and for parts crossing the U.S.-Canada border multiple times during production. Sherry Ann House, Ford’s CFO, said higher fuel prices are impacting freight and energy costs but have not yet dented customer demand for trucks.

The shift in consumer behavior is reshaping product lines. The federal tax credit for electric vehicles ended on Sept. 30, 2025. Since then, EV sales have dropped nationally. GM reported third quarter sales down 6%, partly due to a smaller EV market. Jacobson said the company is right-sizing its EV capacity to align with demand. Meanwhile, hybrid sales are up 27% in the past year. Ford is planning to offer the Fathom, an electric truck priced under $30,000, as a pre-order in early 2027.

Tesla has regained market share in the U.S. EV segment, capturing almost 52% of new electric vehicle sales this year according to Edmunds. Ivan Drury, director of industry insights at Edmunds, wrote that Tesla is the default choice for many buyers. On its earnings call, Tesla CEO Elon Musk focused on new technologies like robotaxis and humanoid robots, noting that capital expenditures are almost double from this time last year. He also hinted at a potential merger between Tesla and SpaceX, saying special committees at each company were discussing the move.