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Runtime: 11:31
0:00 Trump Threatens Tariffs on All Car Imports…
1:03 …But Will Lower Tariffs If Countries Cut Theirs
2:26 Scout Loses Direct Sales Battle in South Carolina
3:28 U.S. Car Inventory Levels Drop
4:48 Toyota Teases New Fuel Cell System
5:48 Chevy Reveals NASCAR EV Prototype
6:37 Tesla Combats Charging Cable Thieves
7:12 State Department Changes Armored EV Language
8:04 Magna Boosts Q4 Earnings
8:45 Porsche To Cut 1,900 Jobs in Germany
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TRUMP THREATENS TARIFFS ON ALL CAR IMPORTS…
Looks like tariffs are going to be a story all year long and maybe even for the next four years. Yesterday, President Trump said that tariffs on all imported vehicles, not just those from Canada and Mexico, will be coming very soon. The U.S. imports $240 billion worth of vehicles every year. A 25% tariff on them means the CBP, or Customs and Border Protection agency, would collect $60 billion as goods cross the border and hand the money over to the U.S. Treasury. But it also means that overall car prices would go up by $60 billion. And make no mistake about it. The domestic manufacturers would raise their prices to pretty much match that. And that means car sales would go down which would lead to factory layoffs.
…BUT WILL LOWER TARIFFS IF COUNTRIES CUT THEIRS
But Trump may not impose an across-the-board 25%. He’s talking about reciprocity, meaning “we’re going to do to you what you do to us.” And it’s hard to argue with that logic. So, for example, the U.S. imposes a tariff of 2.5% on cars imported from Europe, while Europe imposes a 10% import tariff on cars imported from the U.S. In other words, the European tariff is four times higher. The U.S. also has a 25% tariff on pickup trucks, but Europe really doesn’t make pickups. However, here’s where it gets tricky. Europe also imposes a value added tax, or VAT, on all products sold in Europe, but not if those products are exported. It’s really a tax policy designed to boost exports and hurt imports. Japan and South Korea use a value added tax as well. President Trump says he’s going to include those VATs to figure out how high the tariffs should be on cars that come from those countries. Germany has a 19% VAT, in South Korea it’s 10% and in Japan it’s 20%. Trump says he’ll lower his tariffs if other countries cut theirs and remove trade barriers. So, one thing’s for sure. This story is far from over.
SCOUT LOSES DIRECT SALES BATTLE IN SOUTH CAROLINA
Volkswagen dealers across the U.S. don’t like the automaker’s plan to sell Scout EVs directly to consumers. The dealers say it’s illegal for Scout to sell directly because it isn’t truly independent from VW. And it looks like dealers have won a battle in South Carolina. South Carolina law currently prohibits direct sales to customers but last month, lawmakers introduced a bill that would allow car companies that don’t have franchise dealers to sell direct. But that bill has stalled out in the state’s House of Representatives after a committee suspended debate on it. And while the bill has bi-partisan support, the South Carolina Automobile Dealers Association is dead set against it and has lobbied hard to prevent the bill from being enacted. Scout is building its plant in South Carolina and expects to start production in 2028. So, depending on how this goes, it may be illegal for workers at that plant to buy the very vehicles they are making.
U.S. CAR INVENTORY LEVELS DROP
In a sign that car companies are showing some discipline, inventory levels in the U.S. fell below 3 million units in January. Cox Automotive reports that new-vehicle inventory was at 2.92 million units last month, down from 3.11 million in December. But because the sales rate slowed, days’ supply increased, which is estimated at 96 days, up from 80 the month before. By having lower inventory automakers are able to hold pricing where it’s at and boost profitability. But the lower inventory levels also suggest that car makers don’t expect sales to go up by that much this year. However, Toyota is one exception. It told dealers in the U.S. to expect more inventory this year, in an effort to boost sales. Last year, the Toyota brand sold just under 2 million vehicles in the U.S., up 3% from a year earlier. And the company believes it can top that this year while maintaining a low days’ supply of vehicles.
TOYOTA TEASES NEW FUEL CELL SYSTEM
Toyota is teasing its new third-gen fuel cell system that it will reveal in more detail next Wednesday at the International Hydrogen & Fuel Cell Expo in Japan. It says it was able to improve fuel efficiency, which will result in about 20% more cruising range than before. When applied to a vehicle like the Mirai, it would have about 480 miles of range or about 80 more miles than before. Toyota also doubled the durability of the system, claiming it’s comparable to diesel engines and high power. Cost was another focus. Without providing any figures, it says it significantly lowered cost through design and manufacturing innovations. Size of the fuel cell was reduced as well, which will make it fit into a wide variety of applications. Toyota says it plans to introduce the new system in 2027 at the earliest in markets like Japan, Europe, North America and China.
CHEVY REVEALS NASCAR EV PROTOTYPE
Chevy officially revealed its version of NASCAR’s all-electric prototype. The racing series debuted its EV concept last September. Then Ford recently showed its version, which is just that NASCAR prototype with a Mustang Mach-E body on top. And now it’s Chevy’s turn, but with a Blazer EV body on top. While we could see a day where all-electric NASCAR races are a thing, we think it’s more likely that NASCAR would turn to crossover/SUV body styles first, since Ford and Chevy no longer offer passenger sedans. Toyota, NASCAR’s other participating automaker, clearly still has sedans, but when it shows off its EV prototype for the racing series, which crossover/SUV do you think it will use?
TESLA COMBATS CHARGING CABLE THIEVES
Scrap copper has decent value, which makes the thick cables at charging stations a target. So, Tesla is trying out a couple of anti-theft solutions. One is like the exploding dye packs used by banks. The outside of the cable gets covered with a wrap that’s embedded with a series of hoses, that when cut, shoots out a high-pressure dye all over the place. The other solution is to etch “Property of Tesla Motors” directly onto the copper wire, so a recycler would know it’s been stolen.
STATE DEPARTMENT CHANGES ARMORED EV LANGUAGE
Speaking of Tesla, could we start seeing state officials driving around armored versions of its vehicles? The U.S. State Department has set aside a budget of $400 million for “Armored Electric Vehicles” over the next 5 years. When the budget was first drafted under the Biden Administration in December of last year, it included “Armored Tesla (Production Units)” as one of its line items. Also included were armored sedan, armored EV (not sedan) and even armored BMWs. But the State Department has now changed all of those to the more generic “Armored Electric Vehicles.” However, we’re unsure if it also changed how those expenses will be recorded because the vehicles were strangely listed under categories like “Miscellaneous Food Manufacturing.”
MAGNA BOOSTS Q4 EARNINGS
The financial news coming out of the supplier industry hasn’t been good lately, but Magna’s Q4 earnings report offered a glimmer of hope. Sales hit $10.4 billion, up 2%, thanks to higher production in the U.S. and China, which offset lower production in Europe. Magna’s operating profit was up 23% to $381 million, but its net profit dropped 25%, coming in at $203 million. Interestingly, one of the reasons its profits slipped was because of the cost of shutting down production of the Fisker Ocean at its Steyr plant in Austria.
PORSCHE TO CUT 1,900 JOBS IN GERMANY
Automakers and suppliers in Europe have slashed thousands of jobs, especially in Germany, in order to cut costs. And now Porsche is the latest but it isn’t making cuts as deep as the others. The automaker announced it’s cutting 15% of its workforce at its main plant in Stuttgart and one of its R&D centers in Germany. That translates to about 1,900 jobs. Porsche plans to reach that goal by 2029 with early buyouts and severance packages, not through forced layoffs. The automaker is looking to cut costs because of slumping sales in China and weak EV demand.
But that brings us to the end of today’s show. Thanks for tuning in and I hope that you have a great weekend.
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I guess SUVs in NASCAR would be technically proper. I mean it is a race of what is supposed to be popular models of their day. I just don’t think SUVs is the way to win the hearts of race fans.
VAT and its ilk are merely sales taxes. A car manufactured in Europe also pays the VAT when sold in the EU just like an imported car from the U.S.. There is NO unfairness. Since it’s a sales tax, the car does not pay it on export. Import duties are a different kettle of fish.
How is this different than state sales taxes like many states have? I have also paid city sales tax in San Antonio, something that is not done in cities outside the U. S. to my knowledge.
Albermarle,
Here’s the difference. A VAT (value added tax) is not just a sales tax, it is a tax on the value that gets added to a product at each step of the manufacturing process. But it’s only applied at the retail point of sale–when it gets sold to consumers. Automakers do not pay a VAT on the components they buy from suppliers in their country or their economic bloc (EU).
The VAT does not get applied to exports. So, for example, a German-made car exported to the US leaves the country with no taxes on it. It gets sold in the US and a state sales tax is added to it, typically 6-8%. Since Germany charges a 19% VAT, that’s like a providing a 19% subsidy for the exported car.
Conversely, an American-made car exported to Germany goes on the boat with all the US taxes that were applied during each step of manufacturing, then gets hit by a 19% VAT when it’s sold in Germany. The VAT hurts products that are imported from a country that does not use a VAT. It’s a non-tariff barrier.
I’m using Germany as an example, but you can apply that to any European country as well as Japan and South Korea.
John, do US built Benzes and BMWs sold in Germany have any advantage, re. VAT compared to Fords, Chevys, and Toyotas built in the US and sold in Germany?
If theft of copper is a major problem, why not use aluminum, which has much less value? It would need to be two gauge sizes larger, like 8 AWG Al to replace 10 AWG Cu, but wouldn’t that work, or would it not be flexible enough?
New Cyber truck locally with a black wrap,looks pretty sinister
John, Is the expected eventual elimination of the copper penny expected to reduce the cost of copper? I would have thought that the slowing sales of EVs would have already had an effect. As for Tesla, with EV subsidies leaving, I would expect that the US government will toss a bone to Tesla by buying a couple hundred thousand cars. Maybe the Modlel 2 will be available in a postal van version as well.
Since 1982, US pennies have been only 2.5% copper, and are mostly zinc.
Why would the State Department need to purchase armored Cybertrucks, when they can just buy or rent armored autonomous cyber/Robo taxis from Tesla? This way they Musk can say he saved the government money on the CT purchase AND saved money on having a driver, since those vehicle will not need to be chauffeur driven! Would it be a conflict of interest for Musk to sell Tesla’s to the government that he works for? No! Mr. Musk said it wasn’t a conflict so it must not be! Look, he’s apart of the made up department that’s supposed to be saving the government money and eliminating wasteful spending. So, if the government purchases his product, if has to be the best option and for the right price, right? This way he can also beta test the technology with the very lawmakers who will be deciding the very laws, rules and policies that govern autonomous vehicles! Talk about baptism by fire! LOL
John
I did not realize that work in process was taxed in the US as it went along. What tax (not income tax, of course) would an OEM pay for a seat from another state? There must be tax treaties between states allowing the free movement of goods between them. I would expect that taxes based solely on value are not accrued as the vehicle is assembled. Since there is no export tax, what costs have been accumulated in the US that wouldn’t be accumulated in Europe?
I must investigate further as this is interesting.
Wait a minute, wait a minute! Law makers CAN NOT use the Cybertrucks as their congressional vehicle! Those vehicles, especially the ones with any type of autonomous driving, recorded the routes driven and they won’t be able to go see their mistresses, without there being a record for the trip! So, it would be a waste to purchase the vehicles, since they would just sit there, unused.
Wait. Government electric vehicles being purchased as Miscellaneous Food Manufacturing? WOW!
What a common sense space to tariffs. We start as high as the worse offender and offer to lower ours to match theirs. Seems fair and reasonable.
Probably too many liabilities but too bad they can’t keep EV charging cables hot if moved. Then thieves will only ever cut one.
Scout is going to fail even if they can sell direct. It will be a flash in the pan and watch sales crash the second year.
NASCAR days are numbered. They used to keep fans excited by being able to buy the cars that were raced so they had Chevy, Ford and Mopar followers. Even as the cars became less stock and more alike the drivers were a reason to be a fan. But as drivers switched teams and numbers and fans get burned after investing in apparel and all the marketing available they become not hesitant to be a driver fan. So without the car make without the driver what’s the reason to watch? They go electric will be the nail in the coffin. IMO
Trump’s tariffs and tariff threats, especially in violation of an agreement he signed, serve only to raise prices, turn the US into an unreliable trading partner, and hurt what’s left of the north American based auto industry. Tariffs on aluminum from Canada are especially stupid. They not only run up the price of cars, but will run up the price of beer. I probably won’t be buying any cars in the next four years anyway.
I generally watch one NASCAR race a year on TV, which happens to be tomorrow. It seems to be mainly a lottery, as far as who wins, but it’s fun to watch once a year.
If Scout fails, they can built Audis and Porsches in the factory.
Is there any real market for American cars outside the US, and until recently, Canada, except maybe the middle east? Aren’t a few “specialty” cars like Corvette and Mustang, and maybe Wrangler, about the only “Detroit three” cars even sold in Europe? I suspect the EU can selectively apply tariffs, not including BMWs and Benzes from the US, if would work to their advantage.
Kit, here in Europe, American cars are complete oddities. Tesla for a while was the notable exception, until Chinese and German production kicked in. Now of course, sales are tanking. (Just checked, here in Switzerland, there’s no Tesla in the top 15 in January. That’s a sea change from the Model Y being the best-selling car some time ago.) There’s always the big BMW SUVs, the big (orphaned?) Teslas, and as you say, the Mustang.
Not sure if the Cadillac Lyriq, which you hardly ever see even here in Switzerland, comes from China.
The US had a great opportunity to create a “FTA” (often more of a low common tariffs area rather than free) with the TPP, but against the express requests of old allies like Japan and Australia, the first trump dis-administration scuppered it right away. Though truth be told, it’s not at all certain it could have passed under other circumstances.
The result being that China jumped right in, and a month later very successfully created an alternate Asian FTA. There’s no recovering from things like that. The UK is now seeing what damage Brexit is causing. While Mexico and Canada are the US’ biggest partners for the exchange of goods (and probably services too?).
Instead of focusing on being an attractive destination for investment in innovation and high-added value, high-science problem solving (which nowadays includes everything from farming to chip making), the US can of course go back to artisanal chocolate making, pottery, and woodwork. Also, providing occupation forces for the great state of Gaza, while billionaires frolic on the beach.
Late to the news, but I’m very glad the forced amalgamation of Honda and Nissan has been scuppered. The MITI’s prestige definitely is not what it once was.
General Motors aside, which mergers have actually worked, and delivered more than huge bonuses to the boards?
Since Musk trust Autopilot and FSD, instead of armored Cybertrucks, they should purchase autonomous, armored Cyber/Robotaxis for the administration and federal lawmakers. This way they can both save money by getting rid of chauffeurs and beta test the tech technology they will expected to create laws, rules and policies on, seeing first hand how the the tech works so that they are better informed on where the tech is going! Baptism by fire!
Sean Wagner, thanks for the informed information about “things.”
@Sean Wagner. Some points:
-TPP died way back under Obama because even the democrats hated it
– Show me a company in Europe doing anything on the level of US companies Space X and Starlink (to name two obvious examples.) How many Swiss rockets going up this year? How many Swiss factories churning Swiss branded cars? When a crisis occurs who says “We’d better see what Switzerland thinks!”? Zilch and no one .
– Ask anyone what Switzerland is known for and its chocolate, clocks, a utility knife, and porn. Maybe you also do pottery?. And lately it’s letting yourselves become little Syria to the detriment of your citizens, particularly women.
– America will be fine.
Daily, more than any other manufactured item, Switzerland is know for watches. Have you heard of Rolex, or Swatch? I have some Swiss audio equipment from the 1970s, a Thorens turntable and Revox tape recorder. Both companies still exist, but I don’t know if they still manufacture in Switzerland. Yes, unlike the U.S., Switzerland does not have a rocket industry, or big war materials industry, but there are Swiss handguns and rifles, no doubt of very high quality.