Good morning! It’s Tuesday, January 21, 2025, and this is The Morning Shift, your daily roundup of the top automotive headlines from around the world, in one place. Here are the important stories you need to know.
1st Gear: 25 Percent Tariffs On Mexico, Canada Coming Soon, Trump Says
President Donald Trump has signaled that his administration will slap Canada and Mexico with tariffs as high as 25 percent by February 1. He’s doing this because he feels the two countries are letting undocumented migrants and drugs flood into the U.S. Lovely. Fantastic. Good.
Of course, these tariffs will more likely than not just drive up prices and costs for consumers in the U.S., but your uncle who voted for Trump doesn’t understand how tariffs work, so it doesn’t actually matter. Anyway, here’s more from Bloomberg:
“We’re thinking in terms of 25% on Mexico and Canada, because they’re allowing vast numbers of people” across the border, Trump said in response to questions from reporters in the Oval Office on Monday night. “I think we’ll do it Feb. 1.”
Earlier in the day, Trump said in his inaugural address that “instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens.” He stopped short of mentioning specific countries as tariff targets.
His off-the-cuff comments, though, were aimed at two allies vital for US energy imports and auto supply chains. Any volley of new border taxes threatens to set off a trade war among the signatories of the US-Mexico-Canada Agreement, the successor to Nafta negotiated at Trump’s insistence during his first term. The pact governed the flow of $1.8 trillion in goods and services trade, based on 2022 data.
I was just thinking that what we needed in 2025, amid sticky inflation and ever-increasing prices is a trade war with our closest neighbors.
Both Canada and Mexico have said they’d retaliate against American goods if Trump slaps tariffs on them. The USMCA is up for review in 2026.
“Canada’s a very bad abuser,” Trump said, complaining about the current of fentanyl and migrants across the northern US border.
The Canadian dollar and Mexican peso, which had rallied earlier Monday on signs Trump would hold off from immediately imposing sweeping tariffs, fell as much as 1.4% each against the greenback on the news. Bloomberg’s dollar gauge rose as much as 0.7%, the most since Dec. 18.
Here’s what this all means for the automotive industry:
Tariffs of the magnitude Trump is proposing on US neighbors would “cripple” US carmakers, according to Nicole Gorton-Caratelli and Maeva Cousin at Bloomberg Economics. The transport sector more broadly is the most integrated in North America, and the proposed tariffs would affect US value added that’s embedded in cars imported from Canada and Mexico — “so tariffs on these goods mean the US would effectively be tariffing itself,” they wrote in a recent analysis.
Stellantis NV imports about 40% of the vehicles they sell in the US, while General Motors Co. imports roughly 30% and Ford Motor Co. 25%, Bernstein analysts said in a November research note.
The additional levies would hit about $97 billion worth of auto parts and 4 million finished vehicles that come into the US from those countries, and could boost average new-car prices by about $3,000, according to Wolfe Research.
To make matters even scarier, the President indicated that he was still considering a universal tariff on all foreign imports to the U.S. However, he said he was “not ready for that yet.” Fantastic.
In a Nov. 25 post on Truth Social, Trump warned he’d impose 25% tariffs on all Mexican and Canadian imports as “one of my many first Executive Orders” and said it “will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!”
Those tactics set off a scramble in Mexico City and Ottawa to demonstrate to the incoming president that both governments were addressing his concerns.
I’m not really sure how this will all shake out, but if I were a betting man, I’d say “Not well.” Get ready to pay more for everyday items… and your new cars. That’ll definitely own the libs.
2nd Gear: Trump Reiterates EV Policy Cuts In Inauguration Speech
During President Donald Trump’s inauguration speech, he once again vowed to get rid of the so-called “electric vehicle mandate” (which doesn’t really exist anyway) as well as federal regulations that require strict vehicle emissions standards over the next few years.
He claims the executive order would save the U.S. auto industry and its workers, adding, “You’ll be able to buy the car of your choice.” You guys are smart. I don’t need to tell you that you can currently buy the car of your choice. However, I’m still going to say it because the message on this is too stupid to ignore. Anyway, the White House says it will be signed as a part of a larger package of actions around energy policy. From the Detroit News:
Such a regulatory rollback could mean automakers place less of a focus on producing EVs going forward.
In an initial round of executive order signings Monday, Trump revoked a 2021 executive order signed by his predecessor Joe Biden that had sought to make 50% of new vehicles sold by 2030 be electrified, including both fully electric cars and plug-in hybrids. That target wasn’t legally binding.
Also in Trump’s crosshairs are Environmental Protection Agency rules, finalized in March, that set greenhouse-gas emissions tailpipe fleet standard for model years 2027 to 2032. Contrary to Trump’s statements about and electric mandate, those final rules don’t require customers to buy an EV, but are a performance standard that allows automakers to determine their sales mix to stay within certain limits.
The agency projected by 2032 manufacturers may choose to produce fully electric vehicles for about 30% to 56% of their new light-duty vehicle sales, alongside a mix of other hybrid, plug-in hybrid and cleaner gas- and diesel-powered vehicles.
The Biden administration had said the goal was to encourage Americans to buy EVs, and auto companies to start the shift away from gas-powered vehicles, in a bid to cut greenhouse gases and address climate change. The policy was also expected to improve public health, the EPA said, by reducing fine particulate matter and ozone and preventing premature deaths and other health conditions.
The newly minted President also said that the U.S. auto industry would expand during his second term, producing a historic level of vehicles in the process. At the same time, he thanked auto workers, saying he did “tremendously with their vote.”
It’s gonna be a long four years, folks.
3rd Gear: Regulators Looking Into Honda Braking Issue
The U.S. National Highway Traffic Safety Administration is expanding a probe into about 295,125 Hondas over reports of crashes and injuries because of their automatic emergency braking systems. From Reuters:
According to the reports, the automatic emergency braking system in these vehicles was triggering inadvertently, which increases the risk of a collision due to the rapid deceleration.
The problem affects the 2019-2022 models of the Honda Insight, a hybrid electric car, and the Honda Passport SUV, according to the U.S. auto safety regulator.
The regulator said it is upgrading the probe from March to an engineering analysis, and expanding it to include 2023 Honda Passport vehicles.
Engineering analysis is a required step before the NHTSA could demand a recall.
The NHTSA said Honda provided an analysis of the alleged defect and stated that some customers may have possibly had an inadequate understanding of the braking system and its limitations.
NHTSA says its Office of Defect Investigations has received 106 complaints about Honda’s braking issues. Those complaints include three crashes and two injuries.
4th Gear: EV Dip Stagnates European Car Sales
European car sales had a year most automakers would probably rather forget in 2024. Thanks to sticky inflation, higher borrowing costs and general apathy toward electric vehicles, many potential customers decided to just hold onto their old cars. That means European car sales barely grew last year. From Bloomberg:
New-car registrations in the region edged up 0.9% to 13 million units from a year earlier after a bounce in December, the European Automobile Manufacturers’ Association, or ACEA, said Tuesday. Sales of fully electric vehicles fell 1.3% after countries including Germany ended subsidies, dragging their share of the total market down to 15%.
Europe’s automakers are braced for another tough year in 2025, with stricter European Union emissions targets forcing them to sell more EVs despite the drop in demand. Having suffered from falling sales in China, the world’s largest car market, they now also face the threat of additional tariffs in the US under President Donald Trump.
Price pressure, market-share losses in China, tighter emissions regulations, tariff risks and continued lackluster demand are creating a “perfect storm” for European manufacturers this year, UBS analyst Patrick Hummel wrote in a note earlier this month.
New-car sales in Europe could fall in the first six months of 2025, according to analysts at Bloomberg Intelligence. But they predict price cuts in the second half of the year could lift them slightly.
While sales of fully electric cars have struggled, consumers are increasingly choosing models that combine a battery and a combustion engine as range anxiety persists. Plug-in hybrid sales in Europe fell over the course of the year but gained in December. Consumers’ preference for plug-in hybrids over fully electric cars in the US and Europe has complicated carmakers’ EV strategies and led some to add more hybrid models.
[…]
The EU’s stricter limit on CO2 fleet emissions this year is piling pressure on carmakers to lift their share of battery-powered car sales or pay heavy fines. Germany’s VDA car lobby cited the new rules in its forecast that in-country production of fully-electric cars will rise 30% this year, and that registrations will leap 75%.
Demand for electric vehicles got even weaker as the year went on in the EU. In December, EVs saw a 10 percent drop in registration (excluding countries like the UK). It brought an overall December sales rise of 5.1 percent back down to earth.
