Potential tariffs on imported vehicles and components, particularly from China, present significant operational challenges for Canadian automotive retailers. These trade policy changes require strategic adaptation to maintain business viability and customer service standards. Here are 25 strategic recommendations for dealerships to effectively manage tariff-related impacts.
Diversify Your Supply Chain Before It Becomes a Choke Chain
Sourcing vehicles and parts from multiple countries can buffer the impact of tariffs slapped on any one nation. Diversification reduces single-source risk, stabilizes inventory flow, and improves negotiating power. Automakers like Toyota and Magna have already adapted flexible multi-sourcing strategies, so dealers should follow suit. A nimble supply chain isn’t just about survival. It’s a competitive edge when rivals are stuck waiting at the port. Don’t wait for a crisis to force your hand.
Partner with Domestic and North American Manufacturers
Now’s the time to buddy up with Canadian and US-based automakers. By sourcing vehicles and components from manufacturers within Canada, the U.S., and Mexico, dealers can leverage the Canada–United States–Mexico–Mexico Agreement (CUSMA) provisions, exempting compliant goods from specific tariffs. For instance, Canadian-made auto parts meeting CUSMA standards are not subject to new U.S. tariffs, safeguarding cross-border trade and preserving manufacturing jobs. Also, supporting locals may earn you goodwill, and better yet, it skips the tollbooth. Think of it as economic patriotism with a profit motive.
Go Big on Used Vehicles
Used cars are the thrift-store gems of the automotive world. With tariffs inflating new car prices, used inventory becomes your golden goose. Dealers like AutoCanada Inc., operating multiple used vehicle dealerships and an auction business, exemplify the strategic pivot towards the used car market. By expanding used inventory, offering certified pre-owned programs, and enhancing digital retail platforms, dealers can meet the growing consumer demand for cost-effective vehicle options.
Launch Trade-In Bonanzas
Canadian auto dealers are implementing “Trade-In Bonanzas” to navigate the challenges posed by escalating tariffs. This strategy involves offering enhanced incentives for consumers to trade in their old vehicles, thereby boosting sales of domestically produced cars and mitigating the impact of increased import costs. Collaborative efforts among dealerships, such as joint marketing initiatives, further strengthen market presence and customer reach.
Develop Subscription-Based Vehicle Models
As tariffs threaten to inflate vehicle costs in Canada, subscription-based vehicle models offer a compelling solution for dealers and consumers alike. These programs, popularized by brands like Volvo, Porsche, and BMW, allow users to pay a flat monthly fee covering the vehicle, insurance, maintenance, and even roadside assistance. In Canada, startups like Clutch and AutoLeap are pioneering flexible ownership models, while legacy dealers can leverage such platforms to retain customers and generate recurring revenue. It’s like Netflix but with more horsepower.
Expand Service and Parts Revenue Streams
New car sales may slow, but Canadians still need oil changes and brake pads. To capitalize on this shift, dealerships should invest in service department enhancements, including technician training, advanced diagnostic tools, and efficient parts inventory systems. Predictive analytics can optimize parts stocking, reducing holding costs and ensuring availability. Offering extended warranties and maintenance plans can also provide customers cost-effective solutions, fostering loyalty and recurring revenue.
Enhance Online Sales and Digital Showrooms
Tariffs might be unavoidable, but showroom overhead isn’t. Beef your virtual presence with online configurators, video tours, and digital sales consultations. The adoption of AI-driven tools is also on the rise, with over 60% of Canadian dealers expecting significant business impacts from AI integration. These technologies aid in inventory management and personalized customer interactions, which are crucial for maintaining competitiveness in a market affected by tariffs. By offering online purchasing options, dealers can attract budget-conscious consumers seeking alternatives to new vehicles. Bonus: No one has to wear pants.
Create Pre-Owned Certified Programs
Amid escalating tariffs on imported vehicles and parts, Canadian auto dealers can bolster resilience by expanding Certified Pre-Owned (CPO) programs. With new car prices projected to rise by $4,000–$12,000 due to 25% tariffs on imports from Canada and Mexico, consumers are increasingly turning to more affordable alternatives like CPO vehicles. CPO vehicles, typically 5–12 years old, offer a compelling alternative to new cars, providing quality assurance through rigorous inspections and extended warranties. If you can’t sell new, sell peace of mind.
Offer In-House Financing Options
Give customers a one-stop shop for purchasing and financing. In-house financing allows dealers to provide tailored loan options, potentially mitigating the impact of increased vehicle costs on consumers. By controlling financing terms, dealers can offer competitive rates and flexible payment plans, making vehicle purchases more accessible despite tariff-induced price surges. This approach enhances customer affordability and fosters loyalty and repeat business. Also, more control over the process can lead to better margins and fewer buyers fleeing to banks faster than a Civic on cruise control.
Start Auto Leasing “Tariff-Free” Campaigns
Push leasing as a hedge against rising sticker prices. Leasing offers a strategic alternative, providing customers with lower monthly payments and flexibility without the immediate financial burden of full vehicle ownership. This approach can attract cost-conscious consumers and maintain dealership revenues. Additionally, the leasing model supports a steady supply of used vehicles, which is becoming increasingly scarce due to reduced leasing activity. Market it cleverly: “Lease it Now, Dodge the Duty!” and give customers the feeling of outsmarting global trade politics.
Cross-Sell Accessories and Add-Ons
Want to improve margins without selling another vehicle? Cross-sell like your commission depends on it (because it might). By promoting accessories such as floor mats, roof racks, and remote starters, dealers can enhance vehicle value and customer satisfaction. These add-ons improve the driving experience and offer dealers higher profit margins than base vehicle sales. For instance, offering bundled packages that include vehicles and accessories can increase the average transaction value. This approach boosts sales and strengthens customer loyalty by providing tailored solutions.
Lobby Like a Politician in Election Season
Join industry associations and advocate for dealer interests. Lobby efforts should include coordinated campaigns highlighting tariffs’ adverse effects on affordability and local employment. Historical precedent shows that well-timed lobbying influenced the 2018 USMCA negotiations, softening some trade barriers. By adopting a proactive, politically savvy approach (think campaign-style rallies, personalized outreach, and media engagement), dealers can help sway policy, protect profit margins, and keep Canadian showrooms thriving despite tariff headwinds.
Train Sales Teams for High-Touch, Value-Focused Selling
Customers will balk at prices if they don’t see the value. Adopting a high-touch, value-focused sales approach is crucial to navigate this turbulent landscape. This strategy emphasizes personalized customer interactions, understanding individual needs, and offering tailored solutions. Training sales teams in these areas can enhance customer satisfaction and loyalty, even when price competition intensifies. Train your salespeople to be educators, not just closers.
Embrace Hybrid and EV Sales
Canadian auto dealers, brace yourselves: with tariffs piling up like snow in a Toronto winter, it’s time to plug into hybrids and EVs or risk becoming as outdated as a VHS tape. In 2024, zero-emission vehicles (ZEVs) made up 15.4% of new vehicle registrations in Canada, a jump from 10.7% the previous year. Quebec leads the charge, with ZEVs accounting for 32.9% of new registrations. So, dealers, it’s time to embrace the hybrid hustle. Think of it as your dealership’s version of a double-double: A perfect mix to keep you energized and ahead of the curve.
Set Up a Tariff Mitigation Task Force
Get your team together and start brainstorming contingency plans. The Canadian Automobile Dealers Association (CADA) states that tariffs on imported vehicles and parts could spike car prices by $6,000 or more. A Task Force can assess supply chain vulnerabilities, identify tariff loopholes (the legal kind), and spearhead joint purchasing programs to bulk-buy like Costco warriors. Let’s face it: if tariffs are the villain, the Task Force is our Avengers. Except with more spreadsheets and fewer capes. Probably.
Negotiate Better Volume Deals with Suppliers
If you’re facing higher costs, make suppliers share the pain. Volume discounts or longer-term pricing agreements can cushion the blow. Tariffs can increase vehicle costs by up to 25%, but volume buying can trim supplier margins by 10–15%. Dealers get better pricing, more favorable terms, and priority during supply shortages—like having front-row seats when chips are down (literally). Its strength in numbers: the more you buy, the more suppliers listen. So, unite, negotiate, and save because nothing says “thrifty Canadian dealer” like outwitting tariffs with bulk-buying brilliance.
Shift Inventory Mix to High-Margin Models
Canadian auto dealers should shift their inventory mix toward high-margin models to dodge the punch of tariffs like a nimble moose on ice. Think luxury SUVs and tech-packed sedans instead of bargain-bin hatchbacks. Why? Because slapping tariffs on imports can squeeze profit margins thinner than a maple syrup drizzle. High-margin models provide a buffer; their plush profits can absorb a few economic jabs. Also, according to DesRosiers Automotive Consultants, luxury and light truck sales have outpaced compact cars in Canada for years.
Create Loyalty Programs That Work
Tariffs got you sweating like a snowman in July? Canadian auto dealers, it’s time to build loyalty programs that drive results. Studies show that 75% of customers prefer brands with loyalty rewards. But here’s the kicker: only 22% feel the rewards are rewarding. So, ditch the stale coffee punch cards. Offer oil change freebies, priority service lanes, or winter tire swaps.
Host Educational Events for Consumers
Host “Tariff Talks” or vehicle tech workshops. Helping customers navigate higher prices with knowledge builds trust and loyal customers who keep returning for the service (and snacks). Plus, Gen Z loves learning—just not in school. Dealers can spotlight EV rebates, financing tricks, or why your dream truck now costs more than your first condo. With tariffs throwing curveballs at pricing, transparency builds trust faster than a test drive in a convertible. Bonus: Smart customers are loyal and might even bring their friends.
Maximize Vehicle Import Quotas (While They Last)
With U.S. trade tensions revving, the current quota system, which allows roughly 2.6 million tariff-free U.S.-made vehicles annually, is your golden ticket. Once that quota’s capped, the rest could face tariffs of up to 25%—enough to turn a Ford into a Ferrari-priced fiasco. Bulk-buy popular models, lock-in prices, and sweet-talk manufacturers while the border’s still friendly. Think of it as Costco-ing your inventory. This strategy won’t just keep your lots full—it’ll keep margins healthy and competitors guessing.
Build Regional Distribution Partnerships
Form alliances with other dealers to share inventory, pool resources, and cover shortages. According to Statistics Canada, over 70% of Canadian auto imports come from the U.S. Localizing supply chains also trims transport costs and dodges currency volatility. Think NAFTA (or its cooler cousin, CUSMA)—it’s not just a treaty. It’s a survival guide. Plus, joint regional inventory hubs mean faster delivery, lower stock risk, and fewer “your parts on a boat from Asia” apologies. In short, make friends, share parts, and beat tariffs.
Adjust Advertising to Focus on Value, Not Just Price
To survive tariff turbulence, Canadian auto dealers should shift gears from “Price Slasher 9000!” ads to messaging that resonates—value. Sure, a rock-bottom price turns heads, but what keeps bums in seats is long-term value: reliability, fuel efficiency, warranty coverage, and that sweet, sweet peace of mind. According to J.D. Power, 52% of Canadian car buyers value brand trust and service more than upfront cost. Tariffs may spike prices, but smart dealers can outmaneuver this by spotlighting the total cost of ownership. Think fewer repairs, better resale, and a free coffee while you wait.
Prepare for a Surge in Repair Business
Fewer new cars mean more people hanging on to their clunkers. What is the average car age in Canada? A ripe 12.2 years—practically vintage. Tariffs on imported parts and vehicles (especially from the U.S. and China) have inflated costs, making repairs the new black. According to NADA, dealers with strong service departments can rake in 50 %+ of gross profits from the service bay alone. So, dust off those torque wrenches, hire more techs, and stock up on brake pads—Canadians aren’t buying new. They’re fixing old.
Get Creative with Incentives
Canadian auto dealers are navigating the bumpy road of tariffs with a toolkit of creative incentives. One strategy is offering “Tariff-Offset Incentives,” where dealers absorb part of the tariff costs or provide perks like free oil changes or warranty extensions to keep customers smiling despite price hikes. Leasing has become the Swiss Army knife of auto sales—flexible, cost-effective, and less impacted by long-term price hikes, bringing customers back every 3-4 years. By embracing these inventive strategies, Canadian auto dealers are driving full throttle into a future of resilient and customer-friendly operations.
Keep Calm and Shift Gears
Canadian auto dealers are navigating a pothole-ridden road thanks to U.S. trade spats, with steel and aluminum tariffs jacking up vehicle production costs by up to $1,000 per car. Add supply chain hiccups, and it’s like drag racing with a flat tire. The strategy? Diversify. Embrace used cars (the sourdough bread of autos—hot during hard times), lean into EVs (hello, federal rebates!), and charm customers with tech-savvy experiences. Lobbying doesn’t hurt either; CADA has politely raised its voice like only Canadians can.
22 Times Canadian Ingenuity Left the U.S. in the Dust
When people think of innovation, they often picture Silicon Valley. However, Canada has a history of innovation, too. Whether it’s redefining sports, revolutionizing medicine, or just showing America up at its own game, Canadian inventors, thinkers, and dreamers have had their fair share of mic-drop moments. Here are 22 times Canadian ingenuity left the U.S. in the dust.
22 Times Canadian Ingenuity Left the U.S. in the Dust
