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Runtime: 9:32
0:00 Mercedes May Drop Entry-Level Cars in U.S.
0:52 Classic Car Importers Left in Tariff Limbo
1:40 India Lowers Tariffs on EV Imports
2:22 U.S. First Quarter Car Sales Increase
4:38 Changan & Dongfeng Hold Merger Talks
5:23 EU Fines Automakers $500M Over Recycling Scheme
6:25 EU Automakers Want More EV Incentives
7:11 Honda Begins Selling Historic Racing Memorabilia
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MERCEDES MAY DROP ENTRY-LEVEL CARS IN U.S.
Many of President Trump’s import tariffs are set to kick in tomorrow and since nobody really knows this is going to go, automakers are considering all of their options. According to Bloomberg, Mercedes could start cutting imports of its least expensive models, like the GLA crossover. The automaker denied the report, but if the tariffs do go into full effect it could potentially wipe out any profits Mercedes would make on the vehicle. And it wouldn’t just be Mercedes. Most entry-level or affordable vehicles are made outside of the U.S. and most automakers are probably crunching the numbers to see if it would still make sense to import those models with the tariffs in effect.
CLASSIC CAR IMPORTERS LEFT IN TARIFF LIMBO
And that’s only part of what makes tomorrow such a big day because so many groups will be impacted. Maybe even some you never even thought of? Automotive News reports that classic car importers and parts dealers have no idea if the tariffs will apply to them because not even officials from U.S. Customs and Border Protection have been updated by the administration yet. If they are hit, it would be especially impactful to vintage trucks from foreign automakers since they’re already slapped with the 25% ‘Chicken Tax,’ so any new tariffs would stack on top of that. And in some cases, these importers are not big businesses, they’re small groups or individuals, so they could be hit harder by any price increases.
INDIA LOWERS TARIFFS ON EV IMPORTS
But it looks like Trump’s negotiation tactics have paid off with one country. Reuters reports that India is going to lower its import tariff on EVs, which is as high as 100% in many cases. Although, it’s not known how much it will be lowered or when. But part of what makes this so interesting is that automakers in India, like Tata and Mahindra, are against lowering the tariffs right now. They were hoping to see the tariffs stick around for another four years, then see a phased rollback after that. However, it looks like the EV imports will be a part of a wider trade deal between the U.S. and India.
U.S. FIRST QUARTER CAR SALES INCREASE
Did American car buyers rush out to get a new car before the tariffs raise prices? Well, to some extent, but maybe not as much as we thought. Automakers sold over 3.6 million vehicles in the first quarter, up 4.7%. General Motors saw its sales soar nearly 17%. Hyundai-Kia and Mazda were up 10%. Subaru was up 9% and Volvo up 8%. But it was a disaster for Stellantis, which saw its sales plummet nearly 12%. Ford saw its sales fall 1.3%, which it blamed on lower fleet sales. It also phased out the Ford Edge, which cost it 35,000 units compared to last year. As of when we recorded this Mercedes-Benz and Porsche had not reported their sales, but they won’t change the numbers much. Analysts expect sales to stay strong for at least a couple of more months before the impact of the tariffs take hold. And we expect Toyota, Honda and Subaru to feel the impact first since they operate with the lowest levels of inventory.
CHANGAN & DONGFENG HOLD MERGER TALKS
Well that didn’t take long. Yesterday we reported that the Chinese government wants to restructure state-owned car companies because there are too many of them, making too many vehicles. And now the New York Times reports that two of those state-owned carmakers, Changan and Dongfeng, are in talks to merge. The report says the two companies have also alerted their foreign partners about a potential tie-up. Dongfeng has a market cap of $4.9 billion while Changan is valued at $15.6 billion. A merger between the automakers isn’t too surprising. Back in February, there was speculation the two could merge after they both announced plans to restructure at the same time.
EU FINES AUTOMAKERS $500M OVER RECYCLING SCHEME
The EU is fining most members of the ACEA, or European Automobile Manufacturers Association, nearly $500 million for taking part in a vehicle recycling cartel. The EU says the scheme took place between 2002-2017 and it accused the companies of agreeing to not advertise what percentage of a vehicle can be recycled and not disclose how much recycled material is in a vehicle. The EU also says the automakers agreed not to pay dismantlers to recycle end-of-life vehicles. EU law requires automakers to pay for recycling cars if needed, to allow customers to get rid of a car that’s no longer usable. The ACEA represents 16 automakers in Europe and only Mercedes avoided a fine because it blew the whistle on the cartel. Volkswagen, Stellantis, Renault-Nissan and Ford received the largest fines.
EU AUTOMAKERS WANT MORE EV INCENTIVES
And speaking of the ACEA, it says Europe needs to do more to boost demand for electric vehicles. While the group is happy the EU recently gave automakers a three-year window to meet 2025 emission targets and says it’s a “step in the right direction,” the ACEA wants Europe to do more to promote EVs. The share of pure-electric vehicles in Europe is 15%, so the ACEA is asking for more EV incentives and more investment in the charging infrastructure. It’s also calling on the EU to do more to help with zero-emission commercial trucks, which currently only account for 2% of registrations in Europe because that puts the segment in danger of missing emission targets.
HONDA BEGINS SELLING HISTORIC RACING MEMORABILIA
Hey you may remember we told you that Honda was considering setting up a memorabilia business and selling things like parts from Ayrton Senna’s 1990 F1 Championship V10 engine. Well, it officially launched that business and will soon start offering the parts and much more through private sales or auctions.
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1. It’s not generally true that automakers do not make their cheaper models in the US. Honda will make the Civic already.
2. Furthermore, makers do not make their flagship cars in the US. Neither the S class, nor the 7 Series, nor the LS, nor the A8 are made here.
3, India is one of the worst offenders in the world re Tariffs. When India became independent in 1947, every genius economist was comparing it to Japan, devastated after WW II, and looking at the nice infrastructure the Brits had left there, esp the railroads, and how the Indians spoke English as an official language etc etc and predicted (Remember? those who look in crystal balls eat broken glass) that it would have a far stronger economy and standard of living than… Japan!
4. Even if India cuts its tariffs in half, it will still have some of the highest in the world.
5. Seriously, EU automakers need… more EV incentives? They say this with a straight face??? First of all, gas is $10 there! (and Diesel about $7-8 a gallon). Second, most Euro nations are so tiny, an EV with short range can go from one end of it to the other without recharging. And they need…. even more incentives? Losers…
6. I hope the rest of the world follows today’s India example and lower their tariffs in negotiating with the US lowering the threatened reciprocal tariffs. If they miscalculate and start an idiotic trade war, we will not suffer, they will. They have no cards in this game.
@Regulus point 6: “If they miscalculate and start an idiotic trade war, we will not suffer, they will.”
You have got the sequence of events wrong: Trump started the trade war.
Everybody will suffer. Time will tell and it is hard to predict how it will pan out. To me it seems that if Canada, South Korea, Japan, China and the European Union work together more closely the U.S. will become the most damaged party.
We compete against the EU and China in a number of product categories. Both the EU and China have a combination of a significant number of people with high purchasing power and a significant number of low cost labor (Eastern European countries for the EU), while we are increasing the cost of our low labor cost base (Mexico) through the import duties. I don’t see how that can work out well for us.
I “moved up” a car purchase after the election, but it was in late 2024.
It’s Trump’s idiotic trade war. Even the Wall Street Journal called it that, or something similar.
BMW and Mercedes make vehicles in the US, that are mostly sold in the US. Toyota makes Camry, Highlander, Sienna, Tundra, Taco, and others in the US. The US is probably the biggest market for most, or all of them. Unless things have changed, the version of Camry sold in the US is north America specific, and substantially different from Camry sold in other markets.
Toyota and Honda make a lot of CR-Vs and RAV4s in Canada. They, or course, made that decision assuming the US would comply with NAFTA, and later, Trump’s new NAFTA call USMCA.
Mercedes never sold “entry level” products in the US, or not in my lifetime. The A-Class hatch was never sold in the US, and more “basic” versions of A-Class sedan are not sold in the US. The same applies to C-Class. At least you can get an RWD C-Class and E-Class.
Mercedes doesn’t make their flagship sedan in the US, but they make their flagship SUV, the GLS in the US. Similarly, BMW makes the X7 in the US, but not the 7 Series sedan.
@Kit And by producing those GLS, GLE, X7 and X5 for export markets while importing the sedans BMW and Mercedes have two-way freight between Europe and the U.S., getting them reduced cargo rates.
Another big fine for Volkswagen! Haha, the sound of another nail being pounded in their coffin is music to the ears. And ratted out by their own countrymen at Mercedes no less. Hilarious!
Some pretty hefty market caps on those Chinese companies, but I guess that’s what can happen when you’re State Owned and thus have the essentially unlimited resources that issuing national debt can provide. You can straight up buy markets by undercutting all competitors since making profit is not required. Just like Huawei does in telecom. Go ahead and let these brands in the door, EU, and put your own automakers out of their misery. Emissions will finally be zero! You will own nothing , eat bugs, and be happy just as Bill Gates commands.
@Daily Driver Just like the Chinese economy the U.S. economy is not a free market economy, either. We subsidize the agricultural sector, the renewable energy sector, the oil and gas industry, the coal industry and many others to the tune of tens of billion of dollars annually, each.
Unfortunately, I don’t think that we can survive if we would be a capitalist economy: for half a century we have neglected training of skilled tradespeople, engineers and scientists. We want to manufacture in America, but who will actually do that? We have a labor force educated in Communication, English Literature, Political Science and similar topics. Our unemployment rate is around 4%, so at friction unemployment rate. And we are going to kick out millions of cheap laborers. While each measure looks good, the sum of all measures does not add up.
So I am pessimistic about our economic future. I hope I will be wrong. I have been wrong before.
@Wim – correct, the US subsidizes many industries , usually to keep consumer prices low for our general benefit, but that is far from a state owned company. If there were a US Motors backed by our national debt, they would be unbeatable in any market because they could sell as cheaply as necessary to drive all the local competition out of business. Then once you have the monopoly, you jam it to the customer. That’s the pattern China follows unless laws protect the domestic producers. Like how the US keeps out Huawei and BYD.
Sean: after you taped the show, Mercedes denied that speculation you mentioned about its low-end models. As always, it is much better to go with actual news and not rumors or forecasts.
Wim van Acker makes a good point about the lack of available skilled labor needed to support significant manufacturing expansion.
It’s made worse by the ever increasing number of families that cannot afford, or worse, don’t want their children to attain higher education.
Without some kind of national higher education initiative, it’s hard to see how we can get the skilled labor force we need. And that’s before considering the per-head productivity gap issues.
At the opposite end, we’re exporting our most efficient and lowest cost unskilled labor, which will create a different kind of problem.
The whole labor issue is a huge unresolved vulnerability in any potential economic revision plan.
@QCX: fully agree with you.
Florida governor DeSantis wants to weaken child labor laws, so kids can replace the farm and construction workers being deported. This is sick.