Making American cars great again: What are Trump’s plans for automotive?
In the first few months since the former Apprentice host transformed into President Trump, he’s had some pressing matters on his agenda.
These include battling ‘fake news’, the CIA, North Korea and denying links with Moscow. But he’s got some serious plans when it comes to America’s automotive sector too, and he’s already shown he’s not afraid of a fight.
So what does he want to get out of it? We look at the president’s proposals, and how it’ll affect the car industry, at home and abroad…
What is he planning?
We all know Trump’s favourite phrase by now: he wants to ‘make America great again’. As far as automotive is concerned, that means American-built cars, for American-built people. He wants to rejuvenate the 1950s heyday of automotive Americana, when unemployment was low and wages were high.
But how exactly is he going to do this? Well, he’s already had Ford and General Motors reeling after threatening to impose big border taxes on imports if they decide to build their cars out of the US. Specifically, south of the border in Mexico.
General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border. Make in U.S.A.or pay big border tax!
— Donald J. Trump (@realDonaldTrump) January 3, 2017
Not happy with keeping affairs domestic, a cheeky tweet from Trump in January saw over £1bn wiped off Toyota’s market cap as he threatened them with the same high-tax treatment should they build a new factory in Mexico.
Secondly, Trump doesn’t just want to hark back to the productivity of the 1950s, but apparently its pollution too. He recently ordered a review on Obama’s fuel economy standards, which force automakers to promote smaller vehicles and develop new energy-friendly tech like hybrid and EV platforms.
Take this away however, and the gas-guzzling SUVs that we all thought had had their day will be able to continue unchecked, without worrying about what damage they do.
The unfortunate truth is though, that the continuing dominance of SUVs and larger cars in the US has been boosted by the low oil prices of the last few years. In fact, small car sales saw a drop of 6.2% in 2016, while SUVs shot up in popularity from 29.7% to 38.4%.
He’s mad about the environment…
It would appear a major shakeup of environmental legislation would be under way too, but not how most would expect.. That’s because Trump actually wants to roll back pollution standards introduced by Obama that encourage smaller, less-polluting hybrid and electric vehicles.
He’s therefore ordered the Environmental Protection Agency (EPA) to review fuel economy standards and emission levels. Trump hopes this will stimulate the industry, blaming ever-tightening legislation for a fall in the production and demand of American-built autos.
Obama’s war on coal is killing American jobs, making us more energy dependent on our enemies & creating a great business disadvantage.
— Donald J. Trump (@realDonaldTrump) June 3, 2014
Truth is however, more than 100 American cars currently on the market meet standards that stretch to 2020, while hybrids like the Chevrolet Volt already match standards for 2025, so what is he talking about?
Donald’s backward-looking view is not just at odds with 2017 technology though, but also the economy. This year, shares in the all-electric (and very much American) Tesla company surpassed those of Ford and General Motors for the first time.
This is despite forecasts that Elon Musk’s company will deliver around 150,000 cars in 2017 and potentially make a loss, while by contrast, General Motors delivered around 10 million vehicles and made $9.43 billion only last year.
A sure sign then, that markets are hedging their bets on a clean, electric future rather than the coal and oil-powered world Trump seems so keen to cling on to, but with Trump currently replacing EPA scientists with energy industry reps, it would appear he doesn’t really care…
Will it affect cars in Europe?
The fact we actually acknowledge climate change exists in Europe means things will remain rather different for us. Currently (and most likely after any Brexit deal too), new cars in the UK have to abide by strict EU emissions standards.
Any potential ‘toxin tax’ in major towns demonstrates that if anything, we’ll be tightening laws rather than relaxing them. Aside from Tesla, which may buck the trend, we’ve never really been one for American cars in Europe anyway.
Most are too big for our roads, suffer from woeful fuel economy (which is unlikely to improve if Trump has his way) and rather shonky build quality are all reasons people have been put off in the past.
Ok, there’ll always be a market for muscle cars. The Ford Mustang has taken Europe by storm, but let’s be honest – if you’re considering a Mustang, low fuel economy and higher European emission-based tax bills are likely to be low on your priorities list.
He’s so mad about Mexico… and Germany… and Japan
It’s doubtful manufacturers will be complaining about his plans for emission regs, but what about where they build them in the first place? Ford has taken a step back since Trump’s threatening tweet, saying that the plan to build small cars south of the border are now off the table.
Elsewhere, GM has promised that it will only be building its Cruze hatchback there, and most of them won’t be destined for American soil. So far, out of 190,000 Cruzes sold in the US, 185,000 are still built in Ohio, according to General Motors.
Trump’s criticism isn’t just aimed at US makers however. Toyota, Audi and BMW also have plants in Mexico and he says they are all benefiting from cheap Mexican labour before shipping their products north without a tax hike.
German-owned BMW is the only manufacturer that is standing firm against Trump, confirming it plans to open another plant in Mexico. At this point it may be worth pointing out that BMW also has manufacturing facilities in North Carolina, that also received $1bn in funding just a few years ago.
The longshot is that he’s continuing to threaten to introduce up to 35% import tax on Mexican-made vehicles, which he hopes will encourage people to drive American metal – an idea that will prove complicated for the global markets, and rather catastrophic for NAFTA – the North American Free Trade Arrangement.
Many of the famed American pick-up trucks originate in Mexico too, so it isn’t just small, economical models that may be affected. If and when the US withdraws from NAFTA, it’s likely to be one of the biggest shake-ups in American auto production in decades.
The end of global manufacturing?
Despite Trump’s hopes of creating American jobs by relaxing regulations, at some point Trump must acknowledge that automotive is a truly global affair – General Motors now sells more cars in China than it does in America
We don’t get a lot of American-built cars in Europe, but we do send hundreds of thousands across the pond to the US. Top of the list is Volkswagen Group (which includes Audi too) produced 580,600 for the American market in 2016 alone – many of them built in the EU and… horror of horrors – Mexico.
From a UK perspective, Jaguar Land Rover has a stake in the premium US market and while there’s no suggestions Trump’s 35% tax will affect non-Mexican-built cars, it’s always a possibility.
Take the Range Rover Evoque. It currently costs from $41,000, but that’ll increase to over $55,000 should a 35% import tax apply. That’s a very expensive entry-level Evoque.
But ultimately though, the biggest issue is how Trump’s beliefs and policies will affect future plans to create a world that isn't reliant on fossil fuel.
The rumble in Silicon Valley: Elon Musk v Donald Trump
Tesla CEO Elon Musk and Donald Trump are an Odd Couple to rival Walter Matthau and Jack Lemmon. Even though the pair have diametrically opposing views on climate change, Musk sits on a presidential advisory panel and has kept any criticism of Trump’s environmental beliefs under wraps so far.
Musk’s Tesla builds American cars on US soil, which keeps Trump happy. But how long will this cordial relationship last?
One Silicon Valley investor has launched a media campaign and associated website elondumptrump.com, urging the Tesla boss to renounce the president and “become a leader of the opposition to Donald Trump’s climate change policies”. Meanwhile, some Tesla fans have also reportedly cancelled reservations for their Model 3 because of Musk’s association with Trump.
Trump and Musk have wildly-opposed plans for world domination, the latter’s master plan includes all major forms of terrestrial transport (electric cars, trucks and buses) and solar infrastructure. Who will be the winner?