Good morning! Welcome to The Morning Shift, your roundup of the auto news you crave, all in one place every weekday morning. Here are the important stories you need to know.
1st Gear: Trump Is Still On Twitter
Here’s a tweet from our neon president this morning, April 9, in the Year of our Lord 2018.
What this ignores, of course, is that China imports an infinitesimal amount of cars to the U.S. compared to what the U.S. exports to China, meaning that any new tariffs from Trump would likely end mass Chinese imports of cars before they’ve even really started, as Bloomberg has pointed out.
If getting the Chinese to negotiate was the Trump administration’s aim, the effort may have backfired. China threatened to retaliate with its own 25 percent levy on around $50 billion of U.S. imports including cars, chemicals, soybeans and aircraft. That could spell additional pain for U.S. carmakers like Tesla Inc., which makes all of its vehicles in the U.S. and will rely on exports to China for 9 percent of revenue this year, according to Robert W. Baird & Co. analyst Ben Kallo.
Elon Musk’s carmaker is already hindered by China’s current 25 percent import tax that catapults the sticker prices of Model S sedans and Model X crossovers beyond the means of most consumers. An additional duty on top of that would further relegate Tesla into a niche marque only afforded by the wealthiest.
Here’s a reminder that a car trade war, which still has not quite yet materialized despite lots of chest-thumping on pretty much every side, is bad for consumers.
2nd Gear: California’s Fight For Its Emissions Standards Is Breaking New Ground
California has received several waivers from 1970s Clean Air Act, which allows it to enact its own standards when it comes to emissions. But the Trump administration has, in recent days, threatened to revoke those waivers, though the process to do so is still unclear, not to mention the lengthy court battle that would ensue should any revocation happen.
Automotive News has more today on how this all might go down:
How the EPA would go about revoking California’s waiver is unclear. The 1970 Clean Air Act doesn’t specify such a process, and it has never been tried. Over five decades, the California Air Resources Board has received more than 100 waivers, including ones to regulate particulate emissions and, in 2009, greenhouse gas emissions from vehicles.
Granting a waiver requires the EPA to offer it for public comment before making a final decision, “so I would think they would have to go through a similar process” to cancel one, said Janet McCabe, a senior law fellow at the Environmental Law & Policy Center who was acting chief of the EPA’s Office of Air and Radiation under President Barack Obama.
The only criteria under which the EPA can deny a waiver application are if the proposed program is “arbitrary and capricious,” doesn’t meet an urgent need or doesn’t fall within the EPA’s jurisdiction.
Interestingly, California has an even more forceful case for a waiver now, given its recent history of extreme weather.
“If anything, California’s argument for addressing this is even stronger now with the extended drought and longer fire seasons” the state has experienced in recent years, said David Cooke, senior vehicles analyst at the Union for Concerned Scientists.
CARB is working to ramp up its emissions requirements beyond 2025 and eventually will seek a waiver for those rules.
Some experts see Pruitt’s pointed message as an attempt to gain leverage in bargaining with California to accept some relaxation of the existing standards and maintain a unified emissions regime. CARB officials have signaled some willingness to consider changes to the program in exchange for extending the national program through 2030.
A breakdown in those negotiations would likely lead the EPA to seek to withdraw the waiver. If that happens, attorneys general from California and the dozen states that follow its emission rules have vowed to sue the EPA. A lengthy court battle could lead to an extended period of uncertainty for automakers that have long lead times for development and production planning.
Automakers, who have lobbied for weaker fuel economy standards, will probably end up regretting everything.
3rd Gear: Lincoln Wants To Improve Its Residual Values By Selling Less To Fleets
Lincoln, a brand that has been in the dumps as of late, has a plan. The plan is this, according to Automotive News: stop selling to fleets so much, so that Lincolns might retain more of their resale value and, as Auto News puts it, the brand might be less associated with, “airport and hotel livery services.”
From Auto News:
But the brand has cut deliveries to daily rental companies such as Hertz and Avis and has dialed back on providing company cars, both internally and to other businesses, as part of its commercial fleet sales, Parker said.
“Those are very deliberate efforts to really focus on residual values as our new products come out,” Parker said on the sidelines of the New York auto show. “What happens is those cars come back in six to 12 months. That’s problematic on our residual values because that’s when all the depreciation occurs. The longer they stay out, the better.”
Lincoln’s daily rental sales are down 27 percent through the first quarter, according to Ford data.
4th Gear: The End For The Chevy Spark Is Nigh
That’s according to Reuters. I know you haven’t thought about the Chevy Spark in awhile, but who has? GM has. They’ve been thinking long and hard.
General Motors’ South Korean unit said on Monday it may discontinue its Spark minicar and replace it with a crossover as demand in the United States falls.
Sales for the Spark slumped 36 percent to 22,589 units in the U.S. last year.
The production plan for the new crossover is dependent on support from the South Korean government and concessions for its local union, a GM Korea spokesman said. The new model is tapped for production in 2022.
5th Gear: South Korean Unions Aren’t As Powerful As They Used To Be
Unions in South Korea have been more powerful than their counterparts in the U.S., Europe, and elsewhere for for decades, in large part owing to unions’ role in driving social change in the country beginning in the 1980s. But their power has come at a cost to automakers and other corporations, since a powerful union makes it more expensive for corporations like GM to operate. (Won’t someone please think of the poor corporations!) According to Reuters, that all is changing.
Unions at large firms spearheaded South Korea’s fight for wages and basic labor rights against powerful family-run conglomerates known as chaebol, during the country’s rapid industrialization in the 1980s and 1990s.
They also led South Korea’s democracy movement under then authoritarian governments, enjoying backing from non-unionized workers at small firms and the broader public.
But the power and influence of the unions has been weakening. Much of the public is now seeing them as an “interest group which seeks to maximize their own interest”, said Kim Tai-gi, an economics professor at Dankook University in Seoul.
Images of auto workers with shaved heads and red head bands clashing with riot police have come to epitomize today’s public perception of unions.
Just 10 percent of South Korean workers are unionized, about half of what the number was 20 years ago. You should support unions. Unions are good.
Reverse: Honda Wins One
Neutral: Does Trump Think Before He Tweets?
Sorry, bad question.