Mitsubishi, Mazda and Subaru, big exporters to the U.S., may need to keep raising prices - adding to an inflationary squeeze on U.S. consumers.
Tokyo. President Donald Trump gave Japanese automakers some relief by cutting his high U.S. tariffs on their vehicles, but the reduced levies still mean big pain for Japan's smaller car companies, which will stay under pressure in the crucial market.
After months of diplomacy, Trump signed an order on Thursday cutting U.S. tariffs on imported Japanese autos to 15 percent from 27.5 percent, a rare bit of good news for Japan's critical industry, which relies on the United States as its top market.
Smaller automakers Mitsubishi Motors, Mazda, and Subaru are less able to absorb the tariff shock than bigger rivals Toyota and Honda.
Mitsubishi, Mazda and Subaru, big exporters to the U.S., may need to keep raising prices - adding to an inflationary squeeze on U.S. consumers. Eventually the companies may need to pursue closer tie-ups with rivals, stop offering some models in the U.S. or even pull back from the market, analysts say.
Trump's 15 percent tariff on Japanese cars is still six times what the rate was, at 2.5 percent, before Trump slapped levies on autos in April.
Mitsubishi cut its profit forecast by nearly a third last week, and Mazda's exports from Mexico have sunk by more than half since Trump imposed auto tariffs.
The lower rates, which will take effect within a week or two, according to Japan's top tariff negotiator, do not apply to cars shipped to the U.S. from the key production hubs of Mexico and Canada. That means Japanese automakers could still face higher tariffs on vehicles from these countries, though cars qualified under a North American trade pact will be taxed only on their non-U.S. content.
Subaru sold 668,000 vehicles in the U.S. last year, Mazda 424,000 and Mitsubishi 110,000 - combined barely half of Toyota's 2.3 million.
Heavy U.S. reliance
Mitsubishi faces the biggest challenge because it does not produce cars in North America and relies on cheaper models that are more impacted by price hikes.
Reuters sources say the Chinese EV giant has slashed its sales target for the year by up to 16 percent.
"If the cost of their vehicles goes up, then they lose the market advantage they have and could potentially retreat from the U.S. market," said Sam Fiorani, vice president at AutoForecast Solutions.
Last month, Mitsubishi Motors CEO Takao Kato said the company was considering the best approach for potential North American factory collaboration with Nissan following recent environmental regulation changes.
Tokyo-based Mitsubishi has raised prices the most among automakers in the U.S. since tariffs began, averaging $2,403 per vehicle, according to a July survey by online marketplace CarGurus. Subaru had the third-largest increase at $824, while many automakers cut prices.
Mazda's Mexico-to-U.S. shipments plunged 54 percent in the four months starting in April from the same period last year, by far the steepest drop among the 12 automakers that exported to the U.S. from its southern neighbour, Mexican government data shows.
Seeking a boost within the U.S., Mazda is increasing production of its CX-50 crossover SUV at a plant it operates with Toyota in Alabama. It has lowered U.S.-bound shipments from Mexico to preserve margins and has cut incentives on these models, Chief Executive Masahiro Moro said last month.
The Hiroshima-based automaker was likely hoping consumers would accept higher prices, said analyst Julie Boote at Pelham Smithers Associates.
She expects Mazda to work more closely with Toyota - such as by teaming up to make vehicles in the U.S. and on procurement and distribution - with Toyota raising its roughly 5% stake in the company within the next two years.
Mazda managed to maintain slight U.S. sales growth over the April-July period, helped by its move to step up U.S. production.
Price hikes
U.S. consumers, facing higher prices for new cars, may choose used vehicles if new ones would blow their budgets.
"Automakers will start gradually raising prices by model, and new models will be priced higher than older ones," said Koji Endo, head of equities research at SBI Securities, indicating companies will try to minimise the impact on profits.
Mazda said last month it was raising the cost on the base version of its Mazda3 sedan to $24,550 for the 2026 model year, up only $400 from this year, but nearly 20% higher than in 2022.
Subaru decided to eliminate the base version of its Outback model for next year, after unveiling price hikes on several models in response to "market conditions" in May.
Mitsubishi also faces the difficult choice of absorbing the tariff costs or passing them to consumers, risking further loss of market share.
U.S. consumers may increasingly be pushed into the used-car market, Fiorani warned.
"When you get a buyer who's looking for a $30,000 CX-30 or a Mitsubishi Outlander, there's not a lot of competition at their price point," he said.
"It's going to force them to buy a three-year-old used crossover."
