In a vacuum, if I’d never even heard the word “tariff” murmured by anyone, a look at the April sales estimates would have me Super Stokered 3000 (the one with the backpack). Shouldn’t the market selling more cars be good news? In normal times the answer is yes, but these are far from normal times.
The biggest threat to the industry has less been specific tariffs and more the uncertainty around them. This uncertainty has driven sales higher in March and April, which isn’t necessarily good news. My efforts to keep every Morning Dump from being dominated by tariff news have been mixed, at best, though I’ve tried to keep some stories in reserve as I waited until something concrete happened.
Two things have happened worth talking about. The first is that automakers, like many other companies, have withdrawn their guidance for profits and sales in 2025, as no one is sure what’s going to happen. The second thing is a Wall Street Journal report that the Trump administration, having touched the stove, is pulling its hands rapidly back with a somewhat complex way to give automakers time to transition manufacturing here in the United States.
Will Congress do the same to help automakers transition to a more electrified future by blocking California’s ability to set its own environmental policy? Will the Supreme Court? That’s the $10,000,000,000 question.
SAAR Hits 17.4 Million As Americans Scramble To Buy Cars
The feeling going into 2025 was that with economic and political uncertainty having been settled, car sales would ramp up while pricing stabilized or even dropped for consumers. Right now, it seems like we’re headed for the opposite happening: Sales dropping and prices going up.
In the interim, though, sales are way way up as consumers rush to get cars before they potentially get way more expensive. Car sales are highly seasonal, and the industry uses a figure called the Seasonally Adjusted Annualized Rate (SAAR) to show how the market is moving. After a sales blitz in December, SAAR dropped to 15.6 million in January before rebounding to 16.1 million in February.
And then the tariff announcement arrived, and consumers quickly tried to liberate reasonably-priced cars from dealerships. A total of 1.6 million vehicles were sold in March, for a SAAR of 17.8 million. In April, the market slowed a little with 1.49 million cars, which is still good for a SAAR of 17.6 million. By comparison, Americans bought about 1.1 million vehicles for a total SAAR of 16.0 million in April of 2024.
Car sales being up is good, right? Right?
These estimates come from S&P Global Mobility, which points out the problem with these sales being pulled forward:
“Consumers contemplating a new vehicle purchase are rushing to dealers before potential vehicle pricing implications take hold,” said Chris Hopson, principal analyst at S&P Global Mobility. “The March and April sales surges have the potential to set up for future volatility; within the next three months, automakers will have to contend with new inventory and production levels subjected to tariffs, in addition to volatile economic conditions.”
The April S&P Global Mobility US auto outlook for 2025 reflects auto tariff assumptions on imported completely built-up units and imported auto parts. Consequently, compared to previous forecast settings, our calendar year 2025 volume expectations have been lowered by approximately 683,000 units for the year, down to a level of 15.4 million units, a result that would be 4% below the calendar year 2024 total.
If sales are way up at the beginning of the year but forecast to be lower by 683,000 cars because of price increases and market uncertainty, that’s going to mean a lot of cars stuck on dealer lots at the end of the year. Even worse, when that normally happens, automakers and dealers slash prices, which is good for consumers. If those prices are inflated because of tariffs, that’s going to be much harder on everyone.
GM, Porsche, JetBlue, Withdraw Guidance For 2025
If you’re a trade lawyer, then you’re probably part of a private company and therefore not expected to release guidance on expected financial performance for the fiscal year. Which is really too bad, because trade lawyers have to be making bank this year. You know who is going to be buying a new Porsche? Some trade lawyer.
You know who isn’t going to be buying a new Porsche? People with many other professions if the automaker has to raise prices, which is why Porsche is pulling its guidance for 2025 according to this Reuters article.
In April, Porsche said it had shipped added inventory to the United States to get ahead of tariffs.
It said late on Monday that the tariffs, in place since April at 25%, weighed on its business and that its adjusted outlook did not factor in their future effects beyond May.
Porsche said it now expects revenue of between 37 billion euros ($42.1 billion) and 38 billion euros in 2025, down from its previous forecast of 39 billion to 40 billion euros. Its profit margin is forecast to drop to 6.5-8.5%, down from a previous forecast of 10-12%.
General Motors has plenty of North American production, and it still has to revise its forecasts. From The Detroit News:
General Motors Co. on Tuesday reported strong first-quarter results thanks in part to car buyers scrambling to avoid potential price hikes due to tariffs — a wild card causing the Detroit automaker to warn its previous guidance on profits this year should be ignored.
GM’s initial guidance projected profits of $13.7 billion to $15.7 billion this year. But those estimates do not factor in tariffs, Chief Financial Officer Paul Jacobson explained: “You shouldn’t rely on that.”
Thanks for the advice, Paul! It’s not just automakers. JetBlue, my airline of choice, also had to withdraw its annual forecast as recessionary fears have reduced business travel. Something has to give, right?
President Trump Reportedly Softens On Auto Tariffs
Every administration wants to bring more jobs back to the United States, and, in particular, the idea of automotive jobs seems to be fairly bipartisan. The difference is that President Biden’s plan was to incentivize future development with the Inflation Reduction Act, which encouraged companies to build battery plants and new car manufacturing facilities in the United States by offering the carrot of tax incentives.
Automakers did announce a lot of plans to bring jobs to the U.S. during this period, although some of those plans had already started to change before the last election due to demand projections. President Trump’s goal is to bring as many jobs here with protectionist trade restrictions, and he’s either indifferent or hostile to those jobs being in the service of EVs, depending on the week.
The problem with the stick approach is that automakers simply cannot change production to the United States with the snap of a finger. Production lines take years to set up as carmakers carefully choose suppliers based on complex factors having to do with currency, trade barriers, quality, and logistics.
A 25% blanket fee on imported cars on top of other stacking tariffs was causing chaos in the automotive industry, with many wondering if the President might modify auto tariffs like he suddenly did with other tariffs. According to this Wall Street Journal report, confirmed by The White House, some relief is coming. How this works is a little complicated:
The administration will also modify its tariffs on foreign auto parts—slated to be 25% and effective May 3—allowing automakers to be reimbursed for those tariffs up to an amount equal to 3.75% of the value of a U.S.-made car for one year. The reimbursement would fall to 2.5% of the car’s value in a second year, and then be phased out altogether.
Trump is expected to take the actions ahead of a trip to Michigan for a rally outside Detroit on Tuesday evening, marking 100 days since he took office.
Asked about the coming relief for automakers, Treasury Secretary Scott Bessent said at a White House briefing on Tuesday that the decision shows the president’s commitment to bringing manufacturing back to the U.S. “We want to give the automakers a path to do that quickly, efficiently and create as many jobs as possible,” he said. White House press secretary Karoline Leavitt said Trump will sign an executive order on auto tariffs later Tuesday.
I am sympathetic to the fact that our current legislative branch is painfully slow, and there are times and places where the executive must act faster to address an emergency. At the same time, the deliberateness of the legislative process has its benefits. An Executive Order to create tariffs, followed quickly by an Executive Order to reverse and modify them, is hard to plan for and extremely uncomfortable for both carmakers and consumers.
It will require people smarter than I am to make out exactly the impacts of a 3.75%-by-value reduction on varying cars. For American automakers and producers like Honda or Hyundai, it’s probably a big deal. For companies like Porsche, which makes no cars here, that’s possibly less helpful.
Automakers Want Congress To Kill California’s EPA Waiver
Hey, look at this, a group that wants to change an actual law. The California of the ’60s and ’70s was a wild place. The air was filled with a mix of smog, cheap skunk weed, and the sounds of Toto. Hoping to combat at least the first thing (there is no legal remedy for Toto), the Clean Air Act was passed, and it gave California specific power to set its own stricter air quality standards.
Making things more complicated, a bunch of other states signed on to doing whatever California said it wanted to do. Because those states buy a lot of cars, California essentially gets to set the nation’s environmental policy.
Is that fair? A group of oil producers is trying to sue to remove this ability and has gotten clearance from the U.S. Supreme Court to at least go forward with its lawsuit. The Alliance for Automotive Innovation, which represents most automakers in the United States, told lawmakers that they either needed to repeal that waiver or expect fewer cars.
Here’s the main argument from the letter to lawmakers:
Allowing these gas vehicle bans (something never attempted before in the United States) to proceed will increase automobile prices and reduce vehicle choices for consumers across the country at precisely the same time they are adjusting to the marketplace shock of 25 percent tariffs on imported vehicles and auto parts.
In turn, this will increase the overall age of the U.S. vehicle fleet and keep higher emitting/less fuelefficient vehicles – that lack the latest safety innovations – on the roads for more years.
[…]
If automakers cannot sell the required number of electric vehicles in ‘California’ states, they will be forced to substantially reduce the number of overall vehicles for sale to inflate their proportion of electric vehicles sales. We’ve said these electric vehicle mandates will distort the marketplace, depress economic activity, drive up vehicle prices and decimate customer choice.
President Biden granted the waiver as he was rushing out the door, and there’s already a proposed law from Republicans to reverse it, which would almost certainly be signed by the current President if it could make it through Congress.
What I’m Listening To While Writing TMD
Canada voted yesterday and selected interim Prime Minister Mark Carney to continue to serve, which means I’m going to reach for some music of the North. Here’s Snotty Nose Rez Kids with “Damn Right.”
The Big Question
What car not made in America would you like to see built here?
Top photo: Crowd via stock.adobe.com
The California exemption is unconstitutional. Allowing every state to set its own more restrictive emissions standards (not just follow California or not, but actually set their own standards) would be constitutional, but very untenable from an automaker perspective. Aside from that the California exemption was for local smog causing emissions. Carbon is not a local emission.
However, many ague that de-growth is a way to reduce carbon emissions. With regard to reducing economic output and de-industrializing not just the US but North America and the globe it seems the current administration will have unparalleled green credentials.
What car not made here would I want to see made here. None, they’d double in price with no corresponding rise in value. At least until we replace all auto workers with automation.
On a tangent, did everyone notice that Pope Francis’ last ride on earth was in a white Ram Pope-Up with the coffin in the bed. Not that he was aware of this. I hope not anyway, him being sealed in a coffin and all. Guess Stellantis was current on its tithing.
Only among the goldfish population who forgot what Trump 1.0 was like and didn’t bother to read Project 2025. The rest of us knew the shitshow was just beginning.
The real problem is that this administration has no idea what it’s doing and blindly implemented tariffs so badly that it will actually drive manufacturing out of the country. Who wants to build stuff in a country that heavily taxes your raw materials coming in, and gets taxed heavily on exports due to retaliatory tariffs?
Which anyone who can read at a third grade level could figure out, but somehow the “best people” in this administration can’t understand.
Or maybe the whole thing was just a market manipulation scam never intended to bring back jobs, which frankly seems more on-brand for this den of corruption.
Revoke California EPA exemption, One Nation, One Policy
i hope you’re too young to remember LA covered in smog.
Some places are more prone to smog than others. Seems poorly thought-out to have exactly one policy.
And some people prefer to breathe clean air.
It sounds like you’re suggesting we don’t have state laws anymore, which would be bonkers.
It’s all about state rights until someone rich finds it inconvenient.