The introduction of tariffs on imported goods has significantly impacted the cost structure for Original Equipment Manufacturers (OEMs) in the United States and those who are supplying the US market, especially in the aftermarket sector. Our observation of the market shows that for many manufacturers these tariffs have led to sharp flat-rate price increases as a short-term solution to answer the additional costs caused by tariffs. In this blog post, we explore the current challenges OEMs face due to tariffs and how they can use smart pricing strategies to handle these cost shocks.
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Raw materials like rubber, steel, and aluminum have seen price hikes which have directly affected the prices of finished goods and parts. Our experiences show an average increase of around 7–9%. We see the construction and agriculture industries likely affected the most, with price increases of 10–20%. The result: prices fluctuating wildly and pricing volatility has become a critical issue for OEMs aiming to protect their margins and maintain competitive pricing.
In response, some OEMs are speeding up their plans to move production to countries such as Mexico in order to avoid U.S. tariffs. This is evident in cases where U.S.–Canada counter-tariffs hinder competitive selling into Canada. By shifting production to Mexico, these companies not only avoid U.S. tariffs but also maintain access to the Canadian market. However, while this strategy may offer a long-term solution, it takes time and doesn’t address the underlying issue of volatile pricing driven by tariffs and global trade disruptions. As shown in another of our customer examples, where a construction OEM experienced a $20M increase in costs due to new tariffs on rubber sourced from Southeast Asia. The Challenge: How to recover these costs through pricing?
In response to tariff-related cost increases, many OEMs rely on broad price increases based on traditional pricing strategies rather than adjusting prices for each SKU individually. A common practice we see in the market is the "peanut-butter spread" approach which involves applying price hikes across entire product or supplier categories, especially for manufacturers with large product portfolios (often exceeding 10,000 SKUs).
There are two common strategies OEMs use in this approach:
Advantages of the Peanut-Butter Spread Method:
However, while the peanut-butter spread method offers speed and simplicity, it also presents several disadvantages:
Disadvantages:
While this approach may seem efficient in the short term, it can create significant mispricing and result in long-term market volatility. As a result, many OEMs find themselves facing pricing challenges that require further adjustments and strategic refinement.
While tariff forecasting may remain out of reach, OEMs can still minimize the impact of tariffs through strategic pricing and data-driven insights. This is where MARKT-PILOT steps in. MP provides OEMs with the tools they need to offset tariff-driven impact and understand the market consequences: Here’s how:
Focus on High-Risk SKUs and Market Movements
With tens of thousands of SKUs and limited capacity to monitor each one manually, it can be overwhelming for OEMs to prioritize where to make adjustments. MP helps by identifying the biggest market movements, highest-risk SKUs, and highest-opportunity SKUs that require immediate attention. By focusing on these critical areas, OEMs can make more informed, strategic pricing decisions instead of applying blanket price increases.
Strategic Margin Recovery
MP enables OEMs to identify parts where competitors have significantly raised their prices and where market prices have spiked faster than their own costs. This provides valuable pricing headroom—areas where OEMs can recover lost margins without resorting to across-the-board price hikes. This strategic approach leads to more sustainable pricing and less disruption in the market.
Data-Backed Decision Making
Once an OEM adjusts its prices based on supplier cost increases, MP helps to verify whether these changes align with actual market reactions. While MP doesn’t forecast tariffs, it reveals the market consequences of tariff policies. OEMs can assess whether competitors are adjusting their prices in similar ways, whether outliers exist where prices may need to be reconsidered, and whether internal cost-based adjustments have pushed prices too far out of line with the market. This removes the guesswork from pricing decisions.
Long-Term Strategic Insights
MP also provides OEMs with the ability to make long-term strategic decisions by showing how market pricing shifts over time due to geopolitical changes and tariff policies. OEMs can use MP’s insights to understand how regions react differently to tariff impacts and how resilient their pricing strategies are in the face of long-term market shifts. This insight is invaluable for creating pricing strategies that can adapt to future market conditions.
While tariffs are a persistent challenge for OEMs in the U.S. and across the globe, relying on broad price increases as a quick fix can lead to further mispricing and margin erosion. Instead, OEMs should embrace data-driven pricing solutions like MARKT-PILOT to identify the most affected parts, recover lost margins, and make more informed, strategic decisions.
By focusing on the biggest market movements, high-risk SKUs, and long-term market trends, OEMs can weather tariff-induced cost shocks and protect their bottom line in a rapidly changing market.