Gas Tax Holidays Have Some Surprising Opponents

Not everyone loves gas tax holidays, car sales were down in March, and GM. All that and more in The Morning Shift for March 29, 2022.

The U.S. Chamber of Commerce, the biggest lobbying group for businesses in the U.S., is traditionally seen as railing against many taxes. It views them, broadly speaking, as impeding economic growth, which you may or may not agree with depending on your political priorities.

One tax that the U.S. Chamber apparently is down with is the gas tax, according to The Wall Street Journal. This is all in the context of gas prices being high recently, and some states moving to temporarily suspend gas taxes, with others calling for the federal government to do so as well. The U.S. Chamber says: No, because it thinks that infrastructure improvements funded by the gas tax are that important to business.

The U.S. Chamber of Commerce, in a letter sent to members of Congress on Monday and reviewed by The Wall Street Journal, said it would reward lawmakers who oppose a federal gas-tax holiday with higher ratings from the business lobby group.

The chamber spent 20 years lobbying for a federal infusion of infrastructure spending like what President Biden put into law in November. But with midterm congressional elections and state races this fall, politicians are eager to show voters they are taking action to relieve motorists.

"We're concerned to see the benefits of the infrastructure law undermined almost immediately with a suspension of the federal gasoline tax," said Trey McKenzie, the organization's vice president of government affairs.

The chamber says businesses will be among the beneficiaries of improvements to the nation's infrastructure, and that suspending gas taxes threatens the "user pays" model in which those who use transportation systems pay for them.

The WSJ also says that a construction-industry trade group also opposes a federal gas tax holiday, though that is a little less surprising, given how closely linked the issue is to the construction industry's bottom line. But also: Congressional Republicans.

In the House and Senate, however, Republican leaders largely oppose suspending the federal gas tax. Senate Minority Leader Mitch McConnell of Kentucky has accused Democrats of playing "political games," noting that the gas-tax relief would expire soon after midterm elections.

To nudge Democrats into their corner, the road-builders group has been paying for social media ads that invoke former President Barack Obama. As a candidate in 2008, Mr. Obama criticized his opponents for supporting a federal gas-tax holiday during the recession, which he called "a gimmick."

I fear that we must admit that Mitch McConnell is right, for once.

States must think of a different approach to helping motorists in regards to #gasprices. Tax holidays are boosting demand and putting additional upward pressure on price. Consumption must be cut for realistic price drops. Unpopular, but it's the only thing that will work.

— Patrick De Haan (@GasBuddyGuy) March 28, 2022

We can blame Tesla for that, of course, as it started the trend. I'm not even sure reservations are bad, really, if car buying in America goes from a system of largely buying off the lot to a more bespoke experience of ordering the exact car you want, even if it takes some time to get delivered. Still, as The Wall Street Journal reports, it sounds like it will be a rocky road to getting there.

Some customers complain that they have difficulty getting status updates through the dealership or the manufacturer.

Some dealers say they have mixed feelings about the process. While each reservation is a new potential sale, it also puts them on the hook to manage customer frustration as reservation holders wait, often for more than a year, dealers say.

"We're the ones who take the brunt of the complaints," said Deuce Waikem, general manager at a dealership group near Canton, Ohio, that sells Ford, Honda and other brands.

Also, it sounds like the reservation system isn't really designed to smooth the car buying process, as automakers sometimes pretend, but instead to goose numbers to impress Wall Street, even if lots of people make reservations for cars that they don't intend to buy.

Bill Plein was interested in buying one of several electric pickup trucks coming to the U.S. market. So he did what many shoppers of high-demand vehicles have done lately: He made a reservation.

Mr. Plein plunked down a refundable deposit last May for a spot on the waiting list to buy Ford Motor Co.'s new electric pickup truck, the F-150 Lightning, set to start distribution this spring. Late last year, he made a separate reservation to buy an electric pickup from startup Rivian Automotive Inc.

"As soon as one of them says 'Your truck is ready,' then I'll make a decision," said Mr. Plein, a 57-year-old sales engineer who lives near Austin, Texas. He said he doesn't expect to get his truck until the end of 2023, and might go with the Rivian if it is available sooner.

Ultimately, this is all pretty harmless, and buyers have become accustomed to automakers not delivering on their EV promises in a timely fashion, another area in which Tesla was a pioneer.

This is apparently due to a COVID outbreak there, as GM seeks to keep production going at factories in Shanghai, which GM jointly operates with Chinese automaker SAIC.

From Reuters:

General Motors' (GM.N) joint venture in Shanghai has maintained production amid the city's lockdown by asking workers to sleep on factory floors and getting passes for trucks to continue deliveries, two people familiar with the matter said.

Such measures equate to a "closed-loop" management process, which China's financial hub has asked companies to adopt to stay open during a two-stage lockdown to battle its COVID outbreak.

In the bubble-like arrangement, which workers sleep, live and work in isolation from the rest of the world to prevent virus transmission. A similar system was used at the Winter Olympics in Beijing to seal event personnel off from the public.

[...]

GM, which said on Monday that its Shanghai JV was producing normally, declined to comment on the arrangements at its factory. A spokesperson said the company and its joint ventures had developed and were executing contingency plans with their suppliers to mitigate uncertainty related to COVID-19.

Reuters says that the factories make Buicks, Chevys, and Cadillacs, as if this story could not get any bleaker.

I think everyone got pretty tired of talking about various shortages, of semiconductors or cars or both, as it seems to have been less of a story in recent weeks, probably also because more serious events across the world have taken precedence. The shortages are still happening, in any case, as Automotive News reports Tuesday, and new car sales, as a result, are still way down.

With the parts shortfall dragging on, and inflation taking a bite out of consumer purchasing power, analysts are also cutting their outlook for 2022 U.S. sales. LMC now expects U.S. sales this year to tally 15.3 million, down from an earlier forecast of 15.9 million. Cox Automotive on Monday also slashed its forecast for the year to 15.3 million from 16 million. The market rose 3.3 percent to 15.06 million in 2021 behind strong first-half gains.

Analysts believe elevated gasoline prices and rising interest rates will also undermine gains and consumer confidence this year, even as job and wage growth remain strong.

"Momentum has stalled," Cox Automotive Chief Economist Jonathan Smoke said Monday. "The economy has shifted from green [light] to yellow."

Analysts expect March U.S. new-vehicle deliveries to drop 24 to 26 percent to around 1.2 million, with the seasonally adjusted, annualized rate of sales falling to 12.7 million to 13.1 million, down from 17.79 million in March 2021, which kicked off the industry's hottest three-month stretch on record.

First-quarter sales will fall 16 to 18 percent, LMC Automotive, J.D. Power and Cox Automotive predict.

Auto News says that this is particularly concerning because, in more normal years, people traditionally buy lots of cars in March. Will we still be dealing with this this time next year? Who can say.

Volkswagen had planned for Porsche to go public some time later this year, as Porsche pivots more to EVs and automakers still hold faint hopes of cashing in on how popular EV companies are in public markets. The business case is clear, in other words, though it seems that Russia's invasion of Ukraine might force Volkswagen to change its plans, though it's not exactly clear why.

From Reuters:

Volkswagen aims to conduct the Porsche initial public offering (IPO) in the fourth quarter of 2022, though that may change if the conflict in Ukraine drags on, Porsche SE's finance chief said.

"We cannot rule out, if the conflict lasts a longer time, that this could have potential implications on the listing," Johannes Lattwein told a news conference, without elaborating on how it would affect plans.

No final decision has been made on the proposed IPO, the company said.

A framework agreement for the listing proposed by Volkswagen in February includes selling 25% plus 1 ordinary share in the carmaker to Porsche SE as well as listing up to 25% of Porsche AG's preferred stock.

Some 49% of the IPO proceeds would be paid out to Volkswagen's shareholders as a special dividend.

My guess would be that Volkswagen is worried about the market being in the dumps if the conflict in Ukraine drags on endlessly, which would be less than ideal for VW trying to sell a bunch of new shares in Porsche. This is pure businessman brain at work here: Sure, there is this awful "conflict" happening but, oh, no, my IPO.

It's the end of March and still 28 degrees outside in New York, which should be illegal.