Unscrambling The Automotive Omelette

Unscrambling The Automotive Omelette

I am sick of talking about Tariffs. It appears there’s no escaping the conversation. So, let’s get into it. Here’s a smattering of trade agreement history.

The North American Free Trade Agreement (NAFTA) was signed on December 17, 1992. It went into effect on January 1, 1994. NAFTA immediately lifted tariffs on the majority of goods. It also called for the gradual elimination, over 15 years, of most remaining barriers to cross-border investment and the movement of goods and services between Canada, the USA and Mexico. www.cbp.gov

NAFTA gave automakers the ability to build cars where their costs were lowest. And that advantage ensured that vehicle prices were kept relatively cheaper vs the cost of almost any other goods. youtube.com 

Vehicles were required to have 62.5% of their parts sourced from within NAFTA boundaries.

During Trump 1.0, The Donald decided NAFTA had to die. The concern at that time, similar to today, was that this agreement was causing Americans to lose manufacturing jobs. However, a 2014 Peterson Institute for International Economics report estimated that job loss due to NAFTA was negligible. And that any decline in the automotive workforce was more a result of factory automation than anything trade-related. piie.com

Regardless, NAFTA was replaced with a new agreement called the United States–Mexico–Canada Agreement (USMCA). And The Donald was very pleased with himself. The Donald called it "the fairest, most balanced and beneficial trade agreement ever signed into law" and "the best agreement we've ever made." youtube.com

The Donald wants to violate the best agreement he has ever made or leverage an executive order loophole to circumvent it.

Under the USMCA, vehicles were required to source 75% of their parts from within the continent or face a 2.5% tariff.

Supply chains extend across US borders with Mexico and Canada, making it hard to say what’s American-made. nytimes.com

A 2024 report to US Congress highlighted that automakers and parts suppliers invested billions of dollars in new production to comply with the USMCA rules. And the result of that investment had a mostly positive impact on US employment, wages, capital expenditures, production, and profits. ustr.gov

However, The Center for Automotive Research (CAR) estimated that the USMCA also increased the average vehicle price by about $2,800. dickinson-wright.com

Fast forward to Turmp 2.0, and The Donald threatened to impose tariffs on Canada and Mexico last month and earlier this week on the loose basis of border security and to deter the flow of fentanyl into the US. whitehouse.gov

He has also quipped about moving all auto manufacturing to the US, saying he doesn’t need anything Canada offers. youtube.com

Those tariffs were mostly removed three days later. whitehouse.gov

But the threat of future tariffs looms. forbes.com

Automakers' decades-long relationship with all three countries is not easily undone.

Canada’s Finance Minister Dominic LeBlanc suggests you can’t “unscramble the automotive omelette.” Attempting to move all North American automotive manufacturing to the US is both unlikely and an expensive endeavour that would cost billions of dollars, take years to accomplish, and would likely bankrupt US OEMs before Trump’s term ends. youtube.com

Any tariffs put in place will result in higher costs for consumers. youtube.com

Dealers in the US are already feeling pressure and exhibiting concern regarding potential increases in vehicle costs caused by these tariffs. youtube.com

In the great white north, Canadians are angry. We’re even being less polite (sorry about that). nbcnews.com

Provincial premiers are launching preemptive tariff and trade responses before another round of tariff threats surfaces next month. youtube.com, theglobeandmail.com, theglobeandmail.com

Can Ford, GM, and Stellantis survive without the lower operating costs they enjoy in Canada and Mexico and with the additive cost of building new factories in the US? Nope. youtube.com

Does The Donald know what he’s doing? Definitely not. youtube.com

China’s Automotive Expansion

BYD offers a new roof rack storage compartment for launching your DJI drone. theverge.com

Chery follows BYD with a similar drone storage thingy. carnewschina.com

Xiaomi plans to begin selling its electric vehicles outside of China. cnbc.com

Tesla offers a $1,100 insurance subsidy for Model 3 purchases in China. reuters.com

Toyota launches its cheapest EV in China. reuters.com

Honda launches S7 electric SUV in China. cnevpost.com

Must Know Musk News

DOGE website that is supposed to itemize the activities of the department is bullshit. reuters.com

SpaceX blows up another Starship. theverge.com

Tesla blows up their own business. reuters.com, cnbc.com

Tesla is not immune to North American tariffs. electrek.co

Tesla made a suspicious number of rebate requests during the last few days that the Canadian EV incentive was available, claiming 8,600 sales in one weekend. electrek.co, insideevs.com

Rise Of The Machines

China’s UBTech achieves history’s first deployment of multiple humanoid robots working together. interestingengineering.com

Researchers at UC San Francisco have enabled a paralyzed man to control a robotic arm using a device that relays signals from his brain to a computer. sciencedaily.com

Robot chefs in the kitchens might alleviate staffing shortages in restaurants. sciencedaily.com

Energy

Enbridge says “tariffs be damned” and plans to invest $2.5 billion in expanding existing pipelines from Canada into the US. financialpost.com

Canadian federal government agrees to fund half the cost of developing new nuclear reactor technology. theglobeandmail.com

The US estimates it will take $20 billion and years to refill its oil reserve. reuters.com

But Wait, There’s More

Cadillac’s new electric Escalade IQL will be the longest SUV ever made. theverge.com, topgear.com

The ES90 is Volvo’s longest-range, fastest-charging, and most advanced EV to date. theverge.com

BMW doubles down on battery tech. theverge.com

The Kia EV9 can power your home. electrek.co

Nissan continues to search for a new CEO. reuters.com

Ford improves F-150 Lightning charge times with over-the-air software updates. insideevs.com

VW and Porsche CEO Oliver Blume gets to keep both jobs for now. reuters.com

VW’s future sub-$20K EV leverages Rivian software investment. techcrunch.com

VW brings back physical buttons. theverge.com

VW has an engine cover problem. reuters.com

Waymo’s new Zeekr robotaxi hits the road in the US. theverge.com

Failed EV Startup Canoo’s CEO buys Canoo’s assets for $4 million in bankruptcy fire sale. techcrunch.com

A fully driverless Maserati MC20 Coupe reached 197.7mph at Kennedy Space Center last week, setting a new autonomous vehicle speed record. theverge.com

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