The latest round of tariffs that went into effect Tuesday have led some suppliers to consider raising prices on their car, marine and powersports audio products.
Kicker, Elettromedia (Hertz, Audison), MSC (Brax, Helix, Match), and PowerBass are among those who are considering raising some product prices in response to the now 20 percent additional tariff on goods from China (on top of the previous Trump administration’s tariffs of 7.5 to over 25 percent on car audio goods).
This latest round brings the total tariff on a car audio amplifier to 45 percent.
The 20 percent tariff is just too steep for many companies to absorb, they said.
Rob Wempe, VP of Elettromedia USA said “Two things are sacred to me: my margins and the dealer margins. The dealer’s not going to take less margin and I’m not…The cost is the cost.” The company expects to raise prices on some products by 20 percent. The increase will be only on those products sourced in China. Some of the company’s amplifiers and speakers are built in Italy.
Kicker’s VP of Global Sales and Marketing, Tom Heath, said, “If tariffs stay in place for an extended period, we would need to look at price changes. However, we would be very conservative in changing price points to the dealer and the consumer. We review each item in our assortment as we always do to have the least impact on dealers and consumers.”
Kicker said it does not have a specific time frame in mind for any price changes and will hold off as long as possible. “We should be able to make it past the second quarter and into the third quarter before we would need to address price changes going forward.”
Heath and others hope the tariff on goods from China won’t be in place very long. President Trump granted Wednesday, a one-month exemption on new 25 percent tariffs on goods from Mexico and Canada.
MSC expects to raise prices selectively. “There will be some change, but we’re going to look at this in the most fair and productive way we can to support our specialist retailers,” said Larry Penn.
There has been considerable back and forth on the tariff announcements from the Trump administration. A month ago, Trump announced a 10 percent tariff on goods from China as well as the Mexico/Canada tariffs. He granted a one month stay on the latter. Then on March 4 he increased the China tariff to 20 percent and reinstated the Mexico/Canada tariffs. Then on March 5, he gave a one month reprieve to automakers on the Mexico/China tariffs, but the China tariff remains in place.
At first, back in February, when suppliers expected only a 10 percent China tariff, many planned to absorb the cost. PowerBass was among them.
But now, Erik Harbour of PowerBass said, “Currently our inventory on core products is solid so I think we will be ok for a bit there, but we do have quite a few new models in route that I can not re-price based on this, so we will have to take the hit unfortunately and average that out over time I suppose.” (See comment section).
Goods mid-shipment from China are subject to the new tariff.
PowerBass plans to eventually move production to a plant outside of China. LinksWell and Epsilon are also considering moving factories to Southeast Asia.
Larger companies, such as Pioneer, Sony and JVCKENWOOD have already moved much of their production to Southeast Asia, according to sources.
It should be noted there is also talk of tariffs on European goods in the future.
In all, the tariffs may have an impact on the economy that could contribute to inflation. If the Mexican/Canadian tariff on automobiles goes through in the future, it would cause the price of new cars to rise by $4,000 to $10,00, reported Automotive News. Ford said it would erase billions of dollars in profits and lead to job losses.
The impact on the general economy may also affect the amount of discretionary dollars consumers can spend on goods such as car audio.
Last month, when commenting on a 10 percent China tariff, Alberto Susterman of DS18 said, “More important at this point is the 25 percent Canada and 25 percent Mexico tariffs that will trigger the real inflation. If gas goes up transportation go up, electricity goes up, food goes up etc, etc. That will be the main problem for us…”
There is still much confusion in the market. Trump could change his mind or negotiate new deals on the tariffs. Many hope so…
Some Chinese factories have now been opening plants in Vietnam for more than two years.
Most of the supporting facilities have been completed in Vietnam, and Vietnam amplifier is also a trend, although most of the small Chinese factories have not opened any plant in Vietnam.
A couple things to note.
Tariffs are paid on the country’s landed cost into the US- which is a much lower cost the dealer cost which already has a profit margin built-in. Another words if a piece has a vendor cost of $500, the tariff is not paid on the $500 it’s how the vendor structures their billing to the American distributor or the vendor’s created US company. Even if the vendor owns the US company they still manipulate the landed cost to their best advantage based on the market place and each country’s best financial advantage.
Heads up! CBS and others reported last week how many of the Chinese vendors over the last 3 years started to move their manufacturing outside of China anticipating unfriendly tariffs to countries like Cambodia and Vietnam. If tariffs continue-who knows which way the tariff wind is blowing-watch the stamped manufacture “Made-In” info.
If you see increases on products not made in a country that is being extra tariffed you should negotiate better pricing on those models. This is just another way to stick it to the retailer and the end-user “hiding profits under the cover of a tariff that does not exist”.
I sure there will be some banter on this topic!
Have a great week all!
DJ
What?
Let’s say that all of a sudden, eggs become 10X more expensive than they used to be. You own a restaurant that serves breakfast. Let’s say it’s a Denny’s. Do you all of a sudden increase the price you charge for eggs by 10x so a Moons over MyHammy is now $70 or do you spread the price increase in your food cost, even though eggs are what is driving your higher food cost, across your entire offering?
Let’s say you’re a hamburger shop across the street and you don’t serve eggs, but you discover that Denny’s, the only other place to get a burger in your town, has increased their burger price to $10 from $6 because they serve eggs and they are trying to maintain reasonable prices across their offering. Do you raise your price from the $5.50 you used to charge so you could undercut Dennys by 50 cents? If not, why not?
Just to clarify this statement more “ PowerBass plans to eventually move production to a plant outside of China. ” With us being vertically integrated we currently operate our three factories with one being in Southern Asia which we will now need to look more into shifting some production over to if needed due to the current increase, and potential additional coming Increase in April.
Don’t worry guys! China is the one paying the tariffs!