Greetings from London!
The last week has netted two trade deals for U.S. President Donald Trump, first with Japan and then with the European Union.
Both deals bring a 15% tariff on cars, which is better than what Trump had threatened but a lot more than they were paying before he took office in January.
Not everyone shares Trump’s joy at the deals because they leave plenty of losers and few clear winners.
Detroit’s automakers complained that the deal with Japan leaves them at a disadvantage because tariffs for Canada and Mexico are still stuck at 25%, while France slammed the EU deal as a “submission.”
But the European agreement was still cheered, sort of, for – as the head of one European lobby group put it -“those who expect a hurricane are grateful for a storm.”
Which brings us to today’s Auto File…
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Automakers count tariff costs
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China’s padded car sales
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Can a U.S. no-frills EV pickup survive?
Tariff bruises
The current earnings season has been the first real chance to gauge the impact of Trump’s tariffs on major automakers.
Aside from a few price hikes since April, automakers have largely tried to absorb the impact of tariffs themselves, taking the hit to their bottom line rather than lose business.
General Motors had already reported a $1.1 billion second-quarter hit to earnings, while Volkswagen cut its full-year sales and profit forecasts after posting a $1.5 billion hit from U.S. border taxes in the first half. The German automaker’s premium Audi unit also cut its profit forecast.
Stellantis reported a 300-million-euro tariff hit for the first half, part of a full-year impact it now expects of $1.7 billion, at the top end of a range it issued just last week.
And Hyundai posted a lower second-quarter operating profit because of U.S. tariffs and warned of a bigger impact in the current quarter.
Still, despite a $570 million tariff lump for the second quarter and warning of a bigger blow for the second half, Korean automaker Kia said it aims to boost its U.S. sales and market share in the second half with new hybrid and gasoline vehicles as some rivals are forced to raise prices because of tariffs.
This, of course, underlines a key reason that major automakers have tried to absorb costs. If you hike your vehicle prices, someone like Kia will be ready to swoop in to try and poach your customers.
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More padding for China’s car sales
Earlier this month, Reuters reported that Chinese EV brands Neta and Zeekr had arranged for cars to be insured before buyers purchased them to inflate sales figures and make it look like they were hitting targets.
But Reuters’ analysis of consumer complaints has found that the tactic has grown increasingly common in recent years in response to a bruising price war in the world’s largest auto market and that it’s not just restricted to Chinese automakers.
You can read more about it here.
A Reuters review of 97 consumer complaints showed that in more than a dozen cases, buyers said they were informed by dealerships that the practice was specifically designed to meet sales targets and covered BYD and Toyota, Volkswagen and Buick.
Vehicles booked as sold before reaching buyers are called “zero-mileage used cars” in China. The practice emerged out of cut-throat competition as the market deals with a years-long price war caused by chronic overcapacity.
This has come as more than 100 car brands are competing to survive consolidation, deepening pressure to bolster sales and take market share.
Can Slate’s cheap EV pickup make it?
Stop me if you’ve heard this one before, but there’s a relatively new EV startup in town hoping for a breakthrough in the U.S. car market.
Yes, it’s a familiar story from the last few years where a number of putative EV makers raised a ton of money then flamed out as the challenge of actually getting to scale like Tesla proved far too much for investors. Want to buy a Fisker, anyone?
But, and as Reuters colleagues Kalea Hall and Nora Eckert report, the latest entrant, Slate, believes it has a shot at success with an affordable electric pickup truck to fill a void left by Tesla which has abandoned plans for a mid-$20,000s EV.
You can read more about it here.
Michigan-based Slate has raised $700 million from investors, including Amazon founder Jeff Bezos, and has racked up more than 100,000 reservations for its cars.
However, the company is launching into a tough U.S. market, as Slate’s sub-$20,000 price tag includes a $7,500 federal tax break that is due to expire Sept. 30.
Tesla’s rough road
Tesla and CEO Elon Musk are walking an increasingly difficult tightrope as the company navigates declining EV sales and an autonomous driving business that has yet to get off the ground.
You can read more about it here.
On last week’s earnings call, Musk said Tesla is “getting the regulatory permission to launch” robotaxis in several states, including California, Nevada, Arizona and Florida.
But Tesla is operating only a small fleet in Austin, Texas, that is not available to the public, and getting regulatory approvals, particularly in California, will likely be tougher than Musk claims.
Meanwhile, as Musk acknowledged, Tesla faces a “few rough quarters” because of U.S. government cuts in support for EVs.
Fast Laps
China’s BYD will start producing cars in Pakistan by August 2026 in a bid to capture growing demand for EVs and plug-in hybrid vehicles in the region.
Valeo shares dropped over 16% after the French car parts supplier cut its annual sales forecast by at least 1 billion euros because of a weaker dollar and shrinking global car sales volumes.
Volkswagen’s truck unit Traton slashed its full-year guidance, citing global uncertainty and weak U.S. demand due to trade tensions.
Russian truck maker Kamaz will cut production and shorten its working week to combat a crisis in Russia’s truck market that it blamed on the short-sighted policy of importers and the central bank’s high interest rates.
Stellantis will sell Chinese-branded EVs developed by joint-venture partner Leapmotor in South Africa starting with the C10 from September.
China’s science and technology ministry issued ethical guidelines for autonomous driving technology, requiring developers to prioritise user safety and refrain from spreading false information when publishing research results.
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