Tariffs are triggering the biggest shakeup in global car manufacturing in decades. As the tariff conversation continues to unfold, missing from a lot of discussions is what the tariffs mean for businesses across the automotive recycling industry. Will tariffs help or hinder auto recyclers looking to improve their bottom line during these tumultuous times?
According to a study by RapidDirect, China dominates the global automotive manufacturing industry, producing over 30.16 million vehicles annually across 124 companies. The country is now facing 125 percent U.S. tariffs that could reshape its export strategy. Japan follows second, producing 337,627 vehicles per company across 23 car companies, with over 7.7 million total vehicle production annually. Japan is also now navigating tariff impacts that could reduce profits by 6 to 59 percent, according to Goldman Sachs.
Paul Delaney, chief visionary officer of Fenix Parts, says the proposed tariffs will be beneficial, specifically for the used parts market.
“A large percentage of the OEM and aftermarket parts with which used parts compete are produced outside of the United States and will become more expensive due to the tariffs,” Delaney said. “Used parts are sourced from vehicles that are already in the United States and will therefore not have to bear the impact of this additional cost. The result is that the value proposition of used parts – OEM quality at a much lower price – is even more compelling than normal.”
With the potential pullback in consumer spending due to tariff uncertainty and the rise in new car prices, Delaney said consumers may keep their cars longer, and therefore, there will be more need for repairs.
“This can create a more positive environment for aftermarket parts produced in the U.S. as the auto industry braces for tariffs,” Delaney said. “Consumers deciding what to do with their cars face a choice between fixing it or purchasing a new vehicle. If they opt for repair, they can further choose from salvage or new parts domestically and at a lower price point, or aftermarket parts, often sourced from China or Taiwan.”
George Carrillo, co-founder and chief executive officer at Hispanic Construction Council, further pointed out that the 25 percent tariffs on imported vehicles and auto parts, which recently went into effect, are causing significant ripples throughout the auto manufacturing industry.
“For manufacturers, the immediate impact is a sharp increase in production costs. Vehicles imported from countries like Mexico, Canada and Japan now face hefty price hikes, adding anywhere from $2,500 to $20,000 to the sticker price depending on the model,” Carrillo said. “Even domestically assembled cars aren’t off the hook, as 40 to 80 percent of their components come from imports. Parts like engines, transmissions, and batteries are essential to the production process, and these tariffs could jack up costs by an additional $4,000 to $12,000 per car.”
Carrillo added that auto recyclers are feeling the ripple effects of these tariffs in more indirect but still critical ways. With higher new vehicle prices pushing the average cost above $50,000, many consumers are opting to hold onto their older vehicles instead of upgrading. This shift sparks a greater demand for affordable replacement parts, giving recyclers an opportunity to fill the gap with salvaged components.
“Higher repair costs are also driving insurance premiums up, and consumers looking to cut expenses are likely to seek out recycled parts over costly new ones. However, there’s a potential downside to this increased demand,” Carrillo says. “The supply of salvageable vehicles could tighten over time as the projected drop in new vehicle sales means fewer cars entering the market. This could create scarcity in the years to come, especially as used vehicles are repaired and kept on the road longer.”
On top of that, recyclers may face rising operational costs due to tariffs on imported aftermarket parts and higher prices for steel and aluminum. For some, this could lead to tighter margins unless these costs are passed on to consumers. Despite these challenges, savvy recyclers with strong inventories or a focus on domestic sourcing could see new opportunities as the market shifts.
“The tariffs are shaking up the auto industry as a whole, and recyclers are no exception,” Carrillo said.
Rob Dillan, founder of EV Hype, said the proposed tariffs on imported cars and auto parts will drive up production costs for automakers globally, and in some cases, they depend on foreign-made parts. Such costs would inevitably be passed on to consumers in the form of higher vehicle prices and could even suppress demand for cars.
“Tariffs are also a global supply chain lightning rod – dealing with them can be chaotic, especially for deals like the United States-Mexico-Canada Agreement (USMCA), which includes companies like Toyota, Volkswagen, and BMW. “Manufacturers could face production slowdowns, delays, and potentially job cuts.”
Dillan said U.S. manufacturers such as Ford and General Motors will face higher costs of production because of steel, aluminum and other parts, and see earnings margins shrink and vehicle prices rise. This may lower consumer demand and slow actual sales. Disruptions in the supply chain could also impact their global competitiveness, especially in the EV sector.
“Consumers, especially those on a budget, may be discouraged by more expensive vehicles as a result of tariffs,” Dillan said. A 5 percent increase in price could cause a 10 percent decrease in demand for new cars. Even those EV buyers who get through despite incentives will see it as a buying delay, even if they still choose to buy.”
Dillan added that auto recyclers are likely to find that prices for materials such as steel, aluminum, and copper will increase, eroding profits. He stressed that the tariffs on imported parts will also put the brakes on the recycling of used auto parts overseas.
“Recyclers are encouraged to diversify their supply chains and play up cost-saving, ‘green’ practices if they want to stay in business,” Dillan said. “If used-car parts become more sought after as vehicle prices increase, recyclers will face higher input costs. Material recovery and sustainability innovations will be among the important factors of growth going forward. Recyclers will need to maintain cost competitiveness.”
“Even while there may be a short-term increase in demand for old components, fewer salvageable cars will eventually reach the recycling stream if new car sales decline today,” said Gil Dodson, owner of Corridor Recycling. High demand parts, including cutting-edge powertrains, infotainment systems, and contemporary safety systems, are available in newer vehicles.
Dodson says the natural “feeder system” for recyclers may become smaller if manufacturers sell fewer new models due to tariff-driven price rises.
“This might eventually lead to an inventory of aging parts, making it more difficult for recyclers to satisfy consumer demand. Anticipating these changes requires forward thinking recyclers to diversify their sourcing tactics and be ready for lower salvage inflows,” Dodson commented.
There will also be increased pressure on auto recycling innovation. Dodson said that in addition to cars and auto parts, tariffs also impact the specialized machinery that recyclers rely on, such as sophisticated vehicle breakdown machines, heavy-duty balers and shredders. Recycling companies would find it difficult to modernize or sustain operations effectively if tariffs increase the cost of importing this equipment or its parts.
“Many recyclers may be forced to innovate internally by adapting older machinery, implementing more manual procedures, or looking for local technological collaborations as a result of rising prices,” Dodson said. “To stay competitive and economical in a shifting trade climate, recyclers may also be pressured to use automated dismantling technology, internet markets and smarter inventory tracking.”
Published June 2025
