Hyundai, Honda, Stellantis, Mercedes, and Audi Shift Key Production to U.S. Amid Tariffs

Mercedes-Benz has decided to shift production of a key SUV model to its Tuscaloosa, Alabama plant by 2027, directly responding to the 25% tariff on imported vehicles imposed by President Donald Trump.

The company confirmed the move on May 1, 2025, stating it will localize a “core segment” vehicle, widely believed to be the GLC SUV, which remains its top-selling import in the U.S.

This decision follows a sharp decline in Mercedes-Benz profits and a 4% drop in global car deliveries in the first quarter of 2025. The company saw its revenue fall by 7% to €33.2 billion, while earnings before interest and taxes dropped 41% to €2.29 billion.

Mercedes-Benz also suspended its financial guidance for the year, citing the unpredictability of U.S. tariffs and their impact on consumer demand and business planning.

The Tuscaloosa plant already produces the GLE, GLS, and Maybach GLS models, exporting about 60% of its output. By moving more production to the U.S., Mercedes aims to avoid tariffs, keep prices stable, and secure its market position.

Automakers Shift Strategies Amid Rising Tariffs

The company emphasized a “local-for-local” strategy, making vehicles in the markets where they are sold to reduce exposure to trade barriers and currency swings. Other automakers have followed similar paths.

Nissan shifted production of its Rogue SUV from Japan to Tennessee. Stellantis, which owns Jeep and Dodge, paused production at plants in Canada and Mexico and laid off 900 U.S. workers.

Volkswagen, affected by the same tariffs, reported a 37% drop in first-quarter profits and warned of further challenges. General Motors estimated the tariffs could cut up to $5 billion from its annual profits.

The tariffs have forced carmakers to rethink global supply chains and delay investments. Many, including Mercedes-Benz and Stellantis, have withdrawn annual forecasts due to the uncertainty.

Automakers now face higher costs, shrinking margins, and volatile consumer demand. The trade policy shift has introduced new risks for companies that once relied on global manufacturing, making local production a necessity rather than a choice.

This story reflects a broader trend: automakers are adapting to protectionist policies by localizing production, absorbing higher costs, and bracing for a more fragmented global market.

The outcome remains uncertain, but the industry now faces a new reality shaped by tariffs and shifting trade rules.