Coffey’s Corner: Tariffs the new roadblocks to growth 

This article originally appeared in the March edition of Powersports Business.

In early 2025, the powersports industry faces significant challenges due to newly imposed tariffs by the U.S. government. President Donald Trump has announced a 25% tariff on imported automobiles, including motorcycles and off-road vehicles, as well as on semiconductors and pharmaceuticals, with implementation expected around April 2, 2025. These tariffs are poised to reshape the landscape for manufacturers, dealers, and consumers within the powersports sector.  

Immediate Financial Implications

The introduction of a 25% tariff on imported powersports vehicles and components is anticipated to lead to substantial cost increases. Manufacturers relying on global supply chains will face higher production expenses, which are likely to be passed down to dealers and, ultimately, consumers. This escalation in prices could result in decreased sales volumes as consumers reassess their purchasing decisions in light of higher costs.  

For instance, companies like Polaris Industries, which have manufacturing facilities in Mexico, are directly affected. The Monterrey plant, responsible for producing a significant portion of Polaris’s off-road vehicles, now faces the prospect of increased operational costs due to the tariffs. Analysts estimate that these new duties could add approximately $400 million in costs for Polaris, a burden that would likely be transferred to consumers.  

Supply Chain Disruptions  

The tariffs are expected to cause notable disruptions in the powersports supply chain. Many manufacturers source components from countries now subject to increased tariffs, leading to potential delays and shortages. Companies may need to seek alternative suppliers or consider relocating production domestically, both of which involve time and significant financial investment.  

The Motorcycle Industry Council (MIC) has expressed concerns regarding these tariffs, highlighting that they could cost powersports companies and their customers billions of dollars. The MIC emphasizes that tariffs are essentially taxes paid by consumers, leading to higher retail prices and potential declines in sales.  

Strategic Responses from Manufacturers  

In response to the tariffs, manufacturers are exploring various strategies to mitigate financial impacts. Some are considering shifting production to the United States to avoid import duties, while others are evaluating adjustments in their supply chains to source components from countries not affected by the tariffs. However, these changes require substantial investments and time to implement effectively.  

For example, BMW has indicated that it does not see the need for a special deal to avoid U.S. tariffs, citing its significant manufacturing presence in the United States, particularly its South Carolina plant. This facility allows BMW to adjust production to prioritize the local market, thereby mitigating the impact of import tariffs.  

Dealer and Consumer Impact

Dealers are bracing for the repercussions of increased vehicle prices, which could lead to reduced consumer demand. Higher retail prices may deter potential buyers, resulting in increased inventory levels and financial strain on dealerships. To counteract this, dealers might offer promotions or financing deals, but their ability to absorb the additional costs is limited.  

Consumers, on the other hand, may face tough decisions as prices for new powersports equipment rise. Some may opt to delay purchases, seek used equipment, or turn to alternative recreational activities. The increased financial burden could also lead to a decline in brand loyalty, as buyers explore different options that fit their budgets.

Long-Term Industry Outlook

The long-term effects of these tariffs on the powersports industry will depend on various factors, including the duration of the tariffs, potential trade negotiations, and the industry’s adaptability. While some manufacturers may successfully localize production or find new supply chains, others might struggle to maintain profitability, leading to market consolidation or exits.  

The industry may also see innovation in product offerings, with companies investing in new technologies or alternative materials to reduce reliance on imported components. Additionally, there could be a shift in market dynamics, with domestic manufacturers potentially gaining a competitive edge over international brands affected by the tariffs.  

Stakeholders must navigate increased costs, supply chain disruptions, and shifts in consumer behavior. Proactive strategies, such as supply chain diversification, production relocation, and innovative product development, will be crucial for companies aiming to maintain their market positions in this turbulent economic environment.  

Till next time, shiny side up and checkered flags!   

Melissa Coffey is a two-time PSB “Women With Spark” award winner and a powersports & motorsports industry veteran with over 25 years of experience in sales and marketing leadership. She currently oversees CATCH, her consulting firm which provides fractional sales and marketing support to companies in the powersports, motorsports, marine, bicycle and EV industries.