Greetings from London! Well, it's beginning to feel a bit like Groundhog Day on the auto beat, where we're back to a new tariff threat from U.S. President Donald Trump almost every day. If only Bill Murray could join us to provide a few snappy one-liners. Late last week, Trump announced a 50% tariff on copper imports, a choice that baffled industry experts because there is no way that U.S. industries can find alternative sources. While it doesn't hurt automakers as much as, say, the construction industry, it will add to the misery they're already feeling thanks to tariffs on steel, aluminium and auto parts. A day later, the president threatened a 35% tariff against Canada. By the weekend, it was a 30% tariff on goods from the European Union. One thing has changed, however, since the last frenzy of tariff announcements. Instead of running round frantically trying to figure out the implications of a particular border tax, companies are not panicking now because as Trump has frequently demonstrated, a tariff announcement today usually doesn't mean a tariff tomorrow. Which brings us to today's Auto File… |
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Subarus bound for sale in the US of A - REUTERS/Carlos Barria. |
Sticking with the US of A |
However much they might dislike Trump's tariffs, Asia's automakers just can't quit the United States. As my Reuters colleagues Hyunjoo Jin, Maki Shiraki and Heekyong Yang report, the U.S. remains by far the most important market for Japan's Toyota, South Korea's Hyundai and Asian rivals including Honda and Nissan. You can read more about it here. North America accounts for at least 40% of the revenue at both Toyota and Hyundai, filings show. The market's importance is unlikely to change any time soon, especially now that China, the world's biggest auto market, is dominated by homegrown electric vehicle makers like BYD. Two Hyundai insiders and two Japanese auto executives separately told Reuters they had no intention of downsizing their U.S. businesses in response to tariffs, even as they acknowledged the difficulties ahead. So far, most legacy Asian automakers have avoided raising prices to pass on tariff costs to U.S. consumers. Stronger players are likely to continue to hold off doing so, despite lower profitability, and will likely focus on taking market share from lower-margin rivals like Nissan and Stellantis. |
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Volvo ES90, a tough sell in the United States - REUTERS/Marie Mannes. |
Tariff lumps for Volvo, others |
Being the most vulnerable European automaker to Trump's tariff parade, Volvo was always expected to suffer more than others. The Chinese-owned Swedish automaker booked an impairment charge this week of $1.2 billion for its ES90 and upcoming EX90 models, citing tariffs and launch delays. The company can't sell the Volvo ES90, which is built in China, profitably in the United States due to import tariffs and its margins are under pressure in Europe. Volvo is not feeling the tariff alone. Porsche said it expects a 300 million euro ($351 million) hit to results for April and May alone because it has been absorbing U.S. tariffs instead of passing them on to buyers. And Nissan has suspended U.S. production of three vehicle models for the Canadian market because of the tariff fight between the United States and Canada. |
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Selling overly cheap cars is hurting Chinese automakers - REUTERS/Stringer. |
China's price war takes a toll |
Experts have warned for some time that China's long car price war and serious production overcapacity will hurt the country's domestic automakers. A Reuters examination of the books at a number of automakers shows just how serious that pain already is. LSEG data for 33 listed automakers headquartered in China show a broad deterioration in key financial metrics over the past six years, highlighting the impact of the price war, which began in 2023. That data showed that the average time carmakers took to pay their suppliers and other short-term creditors widened to 108 days in 2024 from 99 days in 2019 – more than double the amount of time it takes European automakers to pay up. The sector's median net profit margin fell to just 0.83% in 2024 from 2.7% in 2019. |
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Britain revives EV subsidies |
One of the auto industry's most common complaints of the last couple of years has been that while the EU and Britain have pushed an aggressive target of 2035 for going all-electric, subsidies for buying more expensive EVs have dried up. In the UK in particular, the car lobby points out as often as it can that to sell EVs to meet government targets, automakers have had to aggressively discount them. Britain has now gone back the other way, saying it will spend 650 million pounds ($874 million) to subsidize a discount scheme for EVs. The government will offer discounts of up to 3,750 pounds to buyers of EVs priced at 37,000 pounds or below. Britain is already Europe's No. 2 EV market and one in four cars sold in the market in June was fully electric. But the government's discount scheme is expected to further juice up sales. |
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Tesla has launched its Model Y at about $70,000 in India, the highest price among major markets, as the U.S. automaker bets on a country CEO Elon Musk has long criticised for its high import tariffs. General Motors will produce lower-cost lithium-iron-phosphate (LFP) battery cells at its joint-venture plant with South Korea's LG Energy Solution in Tennessee. Ford has agreed to a job protection scheme at its Cologne plant covering over 10,000 workers, with voluntary redundancies planned in response to the sluggish uptake of its electric cars. Chinese automaker Chery denied claims that it had improperly applied for government subsidies for environmentally friendly vehicles. General Motors has paused production at a pickup-truck plant in Mexico for several weeks, crimping output of its top-selling vehicles. MP Materials unveiled a multibillion-dollar deal with the U.S. government to boost output of rare earth magnets and help loosen China's grip on the materials used to build weapons, electric vehicles and many electronics. Think your friend or colleague should know about us? Forward this newsletter to them. They can also subscribe here. |
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