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Runtime: 10:04
0:00 Suppliers Worried About Trump Tariffs
0:51 China Auto Industry Consolidation Already Underway
1:46 China Exports to Flatline in 2025
2:26 Trump Could Erase 38% of Tesla’s Profits
3:11 Italdesign Puts U.S. HQ in Detroit
4:30 Scout Confident it Can Bypass Dealers
5:29 Afeela Likely to Face Dealer Lawsuits
6:18 LG Losing Money on EV Batteries
6:54 Tesla Still Fighting for Musk’s Pay Package
7:31 Tesla Board Has to Give Back Cash & Stock
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This is Autoline Daily, the show dedicated to enthusiasts of the global automotive industry.
SUPPLIERS WORRIED OVER TRUMP TARIFFS
President-elect Trump’s tariff threats are forcing auto suppliers to consider moving some production to the U.S., or close to it. Trump has vowed to impose a 10% tariff on all global imports and a higher 60% tariff on Chinese goods. He’s also threatened to slap 25% tariffs on Canadian and Mexican imports when he takes office. Reuters spoke to several supplier executives at CES who say those threats have them looking into how much production they can bring to the U.S. because the cost of the tariffs would be too much to pass on to consumers and make most car parts produced in low-cost markets uneconomical.
CHINA AUTO INDUSTRY SHAKEOUT ALREADY UNDERWAY
Industry analysts have been predicting a shakeout in the Chinese auto industry and it looks like it already started. Out of the 112 brands that sell NEVs, 23 of them either folded or were consolidated with another automaker in 2024. Taken as a whole, the Chinese industry is operating below 50% capacity utilization. The CEO of XPeng predicts that the Chinese industry has entered the “elimination round” where a lot more automakers will disappear over the next two years. The largest state owned automakers like SAIC and FAW are expected to survive, and so are the large independent companies like BYD, Li Auto, Great Wall and NIO. But the smaller companies won’t be able to compete with them and will start to go out of business.
CHINA EXPORTS TO FLATLINE IN 2025
Not only is the price war in China spreading to more makes and models, the export market is stalling out. The China Passenger Car Association says it sees no growth in exports for EVs this year. Tariffs on Chinese EVs exports to the European Union will hurt demand there, and exports to Russia are expected to drop 10%. For many Chinese automakers 2025 is going to be a really tough year. Even so, the ones that survive are going to be extremely competitive and that will make the Chinese auto industry even stronger than it is today.
TRUMP COULD ERASE 38% TESLA PROFITS
Tesla’s stock price shot up 90% in the weeks after Trump’s reelection and Elon Musk getting the nod to run what he’s calling the Department of Government Efficiency. But analysts at JP Morgan say that Trump’s EV policies could slash nearly 40% of Tesla’s profits. They say that Tesla benefitted from $1.2 billion in sales subsidies to American consumers who bought its cars. And it got $2 billion from selling ZEV credits to other automakers to meet the EPA’s and California’s emission standards. Trump has promised to wipe out those sales subsidies and ZEV requirements and that could blow a big hole in Tesla’s bottom line.
ITALDESIGN PUTS U.S. HQ IN DETROIT
Renowned Italian auto design firm, Italdesign, announced it will open a new office in metro Detroit for its U.S. headquarters. The company will invest $20 million and will create 24 jobs in engineering, sales and marketing. The head of its U.S. operations said having its headquarters in Michigan is “essential to effectively support our American customers.” Italdesign employs around 1,000 people in Italy, Germany, Spain and China.
SCOUT CONFIDENT TO BYPASS DEALERS
Scout Motors is confident it will be able to sell its vehicles directly to customers. It told Inside EVs that it doesn’t think there’s any validity to claims from VW dealers and their lobbying groups that it can’t sell direct because Scout sees itself as independent from owner Volkswagen. U.S. franchise laws say that if a car company has used franchised dealers in the past, it cannot legally drop them to sell direct. VW dealers have said they want Scout vehicles on their lots and the National Auto Dealers Association is already preparing a legal strategy to oppose the direct sales. But Scout says it wants to let the market decide and even if it doesn’t get a dealer’s license, it can still sell directly to customers. It would be just like some Tesla buyers, who had to complete the transaction in their home state but take delivery of the car in another nearby state.
AFEELA LIKELY TO FACE DEALER LAWSUITS
Another EV startup that’s facing similar pushback is Afeela, which is a joint venture between Honda and Sony. It also plans to sell vehicles directly to customers. Afeela says the entire process from the reservation to the final sale will all be handled through its website. And it said it will have two showrooms in California where customers can take delivery of their car as well. But Automotive news reports that Honda dealers have already voiced concern about how Afeela will sell its vehicles. And Afeela might have a harder time claiming independence from Honda, since the Afeela sedan will be built at a Honda factory in Ohio. And then there’s the issue of service. Without dealers on your side, it will be harder for Scout and Afeela to build up a repair network.
LG LOSING MONEY ON EV BATTERIES
The slowdown in EV demand put a dent in battery maker LG Energy Solution’s profits. Analysts expected the company to post an $11 million profit in the most recent quarter but LG reported a $154 million operating loss. Many automakers, including General Motors, one of LG’s biggest customers, scaled back EV plans due to softening demand, which contributed to the loss as well as a 20% drop in EV battery prices last year due to overcapacity.
TESLA STILL FIGHTING FOR MUSK $55 BILLION PAY
Tesla has officially appealed Elon Musk’s rejected pay package. The roughly $55 billion payout was originally opposed by some shareholders who felt misled about how the package was approved by the board and then presented to them. A Delaware judge agreed and rejected it. Tesla then held a shareholder vote and they solidly approved the pay package. But then the same judge rejected it again. So now Tesla has filed with Delaware’s Supreme Court, arguing the judge took away shareholders’ rights to decide for themselves.
TESLA BOARD HAS TO GIVE BACK STOCK & OPTIONS
But here’s something that doesn’t really help Tesla’s case. A judge has officially approved a settlement where Tesla board members from 2017 to 2020 have to pay the company back nearly a billion dollars in cash and stock options. Some shareholders sued the company, claiming board members were compensating themselves excessively. Tesla decided to settle and while they have to give up the cash and stock options, they don’t have to admit any wrongdoing.
AUTOLINE AT CES
Have you checked out the videos we’re posting from CES? There’s some wild technology we saw there, everything from autonomous boats, to your own personal passenger drone, to a robot for your garage that will plug in your electric car so that you don’t have to. We’ve got a number of videos that are already up and more are on the way. And you can find them on the Autoline website as well as our YouTube channel.
ALISYN MALIK ON AAH
And then be sure to catch Autoline After Hours later today when we’ll have Alisyn Malik as our special guest. She helped launch May Mobility, the autonomous ride hailing company that counts Toyota as a major investor, and she now has her own consulting firm called Middle Third. She’s got some strong opinions on where all this mobility stuff is going, or whether it’s going at all. We’ll also have Nora Naughton from Business Insider on the show, so join John and Gary when it all goes live at 3 pm eastern time.
But that’s a wrap for this show. I hope to see you later today.
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Sean, Does Trump still expect US OEMs to be able to sell cars and trucks in Canada and Mexico after the tariffs go on? Maybe it is time for Canada and Mexico to nationalize the US owned factories in those countries. If The US does not want to be their friend, how could anyone expect them to be the US’s friend? Are there no adults in the new government that can explain that you usually treat your friends BETTER than your enemies?
What happened to the NAFTA replacement that Trump signed? Trump and many of his nominees are crazy. I guess we’ll find out in 11 days what will actually happen. It could be a windfall for sellers of Chinese cars in Mexico and Canada.
@tariffs on Canadian-built vehicles
Please correct me if I am wrong. It is my understanding that GM, Ford and Stellantis produce in Canada more or less the same volume as they export from the U.S. to Canada. U.S. companies are producing in Canada and export to the U.S., not “Canada is making and exporting”. I am expecting Canada to put import duties on U.S. made vehicle exported to Canada when we tax vehicles made in Canada. So both trade flows will become more expensive for the buyers in the U.S. and Canada. Under the Japan-Canada Economic Partnership Agreement (JCEPA) new vehicles made in Japan are taxed at 0 – 6.1%.
Under the Canada-Korea Free Trade Agreement (CKFTA) new vehicles made in South Korea are imported tax-free.
So I am expecting that U.S.-made vehicles will get tougher competition from Hyundai/Kia, Toyota, Honda, Mazda, and Nissan.
What do others think?
Kit/Wim —
That was my thought exactly: Didn’t Trump and his allies take it upon themselves 6 or so years ago, to redo the trade agreement between Canada and Mexico, into the NAFTA that we have today?!?! Now they want to arbitrarily break that agreement and put tariffs on those partners in that agreement?! It was because of the US’s position on China, that Mexico and Canada were following their lead and making it difficult of Chinese vehicles from being sold in their respective countries. And so, as a reward for that, The President-elect now wants to put tariffs on goods coming from those countries too! At this rate, the incoming administration it’s about to lose the closest continental allies this country has, or at the very least needlessly straining those relations. Perhaps these tactics will produce an even greater, contractional agreement between these countries, but I can see it encouraging them to play nice with each other.
Just saw the report of the personal drone at CES and was impressed, until I heard the price and the limits of the parachute should the operator experience a failure. Anything above 100 ft. and the parachute would be your safety net, but below that and you’re in for a nasty fall! If your flights take you above water and not far from shore, that might not be an issue, but in an urban setting it could be dangerous! That said, I near thought that a flying vehicle could be practical, but if they made one with the intend to be safely flown about 25-to-30 ft off the ground, with, say, an air bag that would immediately deploy underneath the vehicle, in the event of a failure of some type and could be flown at speeds of up to 20-40 mph, I could see that being a commuter vehicle for cities with heavily congested areas in New York and California.
Make no mistake, Canada is taking the tariff threats more seriously than before. The more amusing Ottawa parlor games include scenarios like forced buyouts of American owned auto factories and inviting the Chinese to come in and run them. Canadians are generally less concerned about China influence than Americans. If Trump threatens military action, the idea of setting up joint China/Canada defense bases in, say, Lake Erie would have to be considered.
Canada is too small to stand on its own, it must be allied with some other large entity. If the US wants out, then Canada has to find another dance partner. Having said that, I’m sure cooler heads will prevail over the near term. But Canadians will remember this uncalled for American aggression for a very long time.