The White House won’t impose new tariffs on imported cars, at least not right now, car companies band together to save the electric vehicle tax credit, tequila makers are mad at Elon Musk and so much more for The Morning Shift on Wednesday, Nov. 14, 2018.
1st Gear: So Much For National Security, Huh
After beating the drum of tariffs on import cars for months—much to the deep consternation of the entire car industry—the Trump Administration will not act to impose them right now, according to a nice exclusive from Bloomberg. That’s based on several sources said to be close to the matter.
As we noted yesterday, the administration was considering imposing tariffs of as much as 25 percent on foreign-made vehicles to counter the EU’s 10 percent tariff on imported vehicles and because President Trump sees an imbalance between the foreign cars Americans buy and the American cars sold in foreign countries. (Never mind that scores of “foreign” cars are made here, or that U.S. automakers largely don’t make the kinds of cars people want to buy in Europe or Japan or wherever.) The tariffs were to be done on “national security” grounds, which as we’ve all seen over the past 17 years means whatever the government wants it to mean that day.
So what happened to the tariffs? The U.S. Commerce Department submitted its draft recommendations to the White House, and officials appear to be eyeing revisions to it before acting:
President Donald Trump met with his top trade advisers on Tuesday at the White House to discuss a draft report on a Commerce Department investigation into the impact of car imports. The people, who spoke on condition of anonymity because the meeting wasn’t publicly announced, said the administration wasn’t ready to act on tariffs and that the report would be subject to further changes.
The Commerce probe, which began in May under section 232 of the Trade Expansion Act, covers imports of automobiles, including SUVs, vans and light trucks, as well as auto parts. Commerce Secretary Wilbur Ross has until February to deliver his findings to the president, who has final say on any tariffs. Trump has threatened tariffs of as much as 25 percent on foreign-made vehicles.
Trump has 90 days after officially receiving the report to decide whether to act should the department conclude that auto imports are a security threat. Commerce could recommend a variety of options to restrict imports, including implementing tariffs and quotas. The president then has 15 days to act after announcing he will move forward with measures.
[...] Officials present for Tuesday’s meeting at the White House included Ross, Treasury Secretary Steven Mnuchin, U.S. Trade Representative Robert Lighthizer, National Economic Council Director Larry Kudlow and Senior Adviser Jared Kushner.
(Wonder who the sources were on this Bloomberg story? My money’s on Kushner, at least.)
So these tariffs could still happen, but probably not until early or mid-2019 if they do. And it is worth noting, as Axios did yesterday, that “Just about every member of [Trump’s] senior economic team besides Peter Navarro believes this is a terrible idea.”
Anyway, can’t wait to continue this adventure next year.
2nd Gear: But Honda Shifts Away Anyway
Anticipating a bad outcome with the tariffs, including retaliatory ones placed by other countries, automakers with an American manufacturing base have already begun shifting some production to other countries or changing existing plans. BMW has done it. Volvo is also not going to export the S60 from America to China anymore.
Now Honda has followed suit, opting not to export the Acura RDX crossover from Ohio to China but to build it locally in the latter country instead, reports the Nikkei Asian Review:
Honda manufactures autos in China through two joint ventures it set up with Guangzhou Automobile Group and Dongfeng Motor Group. Its total vehicle sales in China reached 1.45 million units in the year ended March 2018, accounting for about 30% of the company’s total output. China is Honda’s second largest production country after the U.S., where it produced 1.64 million in the same year.
Production of the new RDX, a medium-sized SUV, started recently at a Guangzhou Automobile plant. Previous versions of the model that were sold in China were imported from the U.S.
So why now, if tariffs may not be going into effect? It’s a hedge, really, to be prepared in case they do, but this potentially puts American jobs at risk. Aren’t we supposed to be winning on trade?
Update: A Honda spokesperson emailed us to clarify that the decision to shift RDX production happened before the current trade dispute between America and China. Here is the statement:
Building products close to the customer is a longstanding Honda business principle. That is why 99 percent of the products Acura sells in America today are built in America, including the third generation Acura RDX. Anticipating strong demand in China, we announced in January that we would also produce the RDX in China to meet growing demand in the Chinese market. This decision was made long before the recent round of trade activity between the U.S. and China. The East Liberty Plant in Ohio is still ramping up to meet unprecedented RDX demand and record sales across North America.
3rd Gear: It’s Lobbying Time
The $7,500 tax credit buyers get for new electric vehicles has meant a nice boost to this growing and important segment of the marketplace. But it has its limits—after an automaker sells 200,000 EVs, they’re cut off from offering the credit. Tesla hit its limit in July, and General Motors and Nissan are up next.
So to try and extend it, these companies are banding together and getting things done the old fashioned American way: by lobbying. Via Bloomberg:
Tesla Inc. and other automakers that are set to lose access to a lucrative tax credit for electric vehicles are teaming in a new lobbying drive to have the federal incentive extended.
The EV Drive Coalition, which also includes General Motors and Nissan Motor Co., formally launches Tuesday with the goal of getting Congress to extend the $7,500 per-vehicle consumer tax credit.
The incentive is credited with helping establish the nascent market for electric cars, but it starts to phase down once a manufacturer sells 200,000 of the vehicles. Tesla reached that limit in July and GM is expected to reach that cutoff later this year or early next year, said Salim Morsy, an analyst with Bloomberg New Energy Finance. Nissan has sold about 125,000 electric vehicles as of September of this year, Morsy said in an email.
[...] “A federal tax credit to help make electric vehicles more affordable for all consumers is integral to reaching a zero emissions future and establishing the U.S. as the leader in electrification,” Dan Turton, GM’s vice president of public policy, said in a statement. “We feel that the tax credit should be modified so all customers continue to receive the full benefit going forward.”
Spurred largely by the Chinese market, automakers are putting their eggs in the EV basket in a big way, with most brands offering a whole slew of electrics by the early 2020s. They want this credit to stick around so Americans actually buy these cars, and it could be an important tool in transitioning our vehicle landscape to an electric one. It can’t stick around forever, but I’d like to see it stay a bit longer.
4th Gear: Even The Tesla Tequila Has People Mad
This has been the year where Tesla CEO Elon Musk has successfully pissed off almost everyone, from the Securities and Exchange Commission to rescue divers who don’t take kindly to being called pedophiles. The latest group that’s taken offense to Musk is... uh, the Mexican entity that regulates tequila, according to Reuters:
On Oct. 12, he tweeted “Teslaquila coming soon” and an accompanying “visual approximation” of a red and white label with the Tesla logo and a caption that stated “100 percent Puro de Agave.”
Not so fast, said Mexico’s Tequila Regulatory Council (CRT). It argued that the “name ‘Teslaquila’ evokes the word Tequila ... (and) Tequila is a protected word.”
The CRT keeps tabs on producers to assure they adhere to strict denomination of origin rules, which dictate the spirit must be made in the Mexican states of Guanajuato, Jalisco, Michoacan, Nayarit or Tamaulipas, among other requirements.
According to the U.S. Patent and Trademark Office website, Tesla has filed an application to trademark “Teslaquila” as a “distilled agave liquor” and “distilled blue agave liquor.” Similar applications have been filed in Mexico, the European Union and Jamaica.
“If it wants to make Teslaquila viable as a tequila it would have to associate itself with an authorized tequila producer, comply with certain standards and request authorization from Mexico’s Industrial Property Institute,” said the CRT in a statement.
I dunno, I’m usually the first to call Musk on his shit, but let the man make his tequila if he wants.
5th Gear: Ford and Walmart Team Up For Autonomous Vehicles
Yeah, even Walmart is getting in on this stuff now. But it’s for delivery vehicles, and I guess we’ll just see how it goes. Via Reuters:
Ford Motor Co (F.N), Walmart Inc (WMT.N) and delivery service Postmates Inc will collaborate to design a service for delivering groceries and other goods to Walmart customers that could someday use autonomous vehicles, the companies said on Wednesday.
The project is the latest to grow out of Ford’s broader effort to develop businesses that could use automated delivery vehicles. Ford was working with San Francisco-based Postmates already to develop delivery services that could employ automated vehicles.
The Walmart pilot, which will take place in the Miami area, initially will use human-driven vehicles operated to simulate how a self-driving vehicle would behave, Ford said. Ford has said it expects to launch commercial production of automated vehicles by 2021.
Reverse: I Can Personally Attest That Texas Has Never Been The Same Since
Neutral: Yes Or No On EV Tax Credits?
Should they be extended here, and if so for how long? The arguments against are that taxpayers are effectively “on the hook” for the EV purchases of other people and that EV users don’t pay into the infrastructure they use via taxes on gasoline. I say if you’re suddenly interested in tax parity and infrastructure improvements, I can think of a few better ways to do that than potentially crippling the EV market before it really takes off. What do you think?