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Miami Herald
an hour ago
- Automotive
- Miami Herald
‘Car Wars' report from Bank of America sees ‘rough ride' for industry in next couple years
FARMINGTON HILLS, Michigan - Bank of America's annual "Car Wars" report forecasts a "rough ride" for the U.S. industry in the next couple of years because of low model replacement rates and struggling electric vehicle growth. The annual study led by analyst John Murphy predicts automaker performance in the U.S. market by looking at product launches over the next few years with the premise that automakers with higher showroom replacement rates will perform better. The report predicts those rates in the next couple of years will be historically low ahead of major truck launches from the Detroit Three later this decade, and because of cutbacks in electric vehicle products from low demand. "What's wild this year is that we expect 159 models to be launched over the next four years," Murphy said before the Automotive Press Association. "Last year, it was over 200. Traditionally, it's over 200" over a four-year stretch. He added: "This year, at 159, is a dramatic decline from above 200 last year. We have never seen this kind of change before." Murphy noted there are 29 new model launches this year, the lowest in decades. He attributed the declines to a pullback in EV investment. Adoption of vehicles with all-electric powertrains has failed to meet industry expectations, with them comprising about 8% of annual U.S. sales. Limited access to charging stations, higher prices of EVs compared to gas-powered alternatives, range anxiety and more have limited adoption. Car Wars is predicting 71 EV nameplates being offered over the next four years. That's about half of what the forecast had expected two years ago. "There are a lot of tough decisions that are going to be made," Murphy said. "Based on the study, I think we're going to see multi-million dollar write-downs that are flooding the headlines for the next few years." Ford Motor Co. last year wrote off nearly $2 billion when it canceled plans for a three-row all-electric SUV, saying it wasn't going to be profitable within the first year. Murphy underscored that automakers will best serve their shareholders by emphasizing their core business - which is gas- and diesel-powered SUVs and trucks - and leveraging connectivity to get customers returning to smaller, strengthened dealer franchises. From those revenues, then, it can invest in future technologies like EVs, autonomy and other software applications and brave threats like tariffs and Chinese competition. "I do think, as we look at this, although we've said lower product intros, that these core products that generate a lot of profit for the companies, including the D3, will likely create a pretty profitable next few years for the industry," Murphy said. "So although it looks a bit scary at the moment, I do think we're looking at a pretty good upside to earnings, and potentially stocks over the coming years." Traditionally, replacement rates average about 15% in the industry. Car Wars predicts rates at about 11% in 2026 and 2027. "It's gonna be a little bit of a rough ride for these two years," Murphy said. The report predicts the Detroit Three's replacement rate from model year 2026 to 2029 will fall around the industry average of 16%, indicating a likely stagnant market share. Ford's was at 16.1%, General Motors Co.'s was 15.7% and Chrysler parent Stellantis NV's was at 15.4%. Ford Motor Co. spokesperson Mike Levine emphasized the Dearborn automaker has new product in the marketplace today, including the full-size Ford Expedition and Lincoln Navigator SUVs that recently went on sale. "Ford is committed to offering our customers vehicles that they love and can't live without," he said in a statement. "We are investing in all-new ICE, hybrid and electric vehicles to provide customers with freedom of choice to find the best vehicle to meet their needs." Representatives for GM and Stellantis declined to remark on the report. On the upper end of replacement rate, meanwhile, is Tesla Inc. It has a 22.4% replacement rate, indicating the Texas EV maker could grow its market share in the coming years. But the rate is also a bit "dubious," Murphy declared, noting Tesla has postponed launches and favors more frequent updates to its vehicles versus total redesigns. "That's questionable whether that all will happen," Murphy said, "given their track record of not really introducing new-generation models." On the lower end is Nissan Motor Co. Ltd. with a 12.3% replacement, indicating it could lose market share. The automaker is under financial stress, has cut jobs and is losing market share in the United States with aging product. "Nissan remains a mess," Murphy said. "It's just unclear what their commitment is, in their current form, to the U.S. market." Copyright (C) 2025, Tribune Content Agency, LLC. Portions copyrighted by the respective providers.
Miami Herald
28-05-2025
- Automotive
- Miami Herald
Trade war with China highlights auto sector's need for rare-earth mineral supply
President Donald Trump's trade war with China underscores the importance of a reliable supply chain for the automotive industry of rare-earth minerals and magnets made from them that are necessary for parts from electric vehicle motors to windshield wipers and anti-lock braking systems. Rare earths describe 17 metallic elements with properties crucial for advanced technologies. Since a tax dispute shut down a rare-earth refinery in Vietnam over the past year, China effectively has had a monopoly on global heavy rare-earth elements processing and has major shares of processing for other rare earths. Retaliating against tariffs imposed last month by the Trump administration, China instituted new export restrictions and licensing requirements on seven medium and heavy rare-earth minerals, creating "dire" circumstances in the U.S. automotive industry if those rules are prolonged. "The rare earth materials from China - how they are imported, not just for us but for the entire industry - has become rather complicated over the last few weeks," Kumar Galhotra, Ford Motor Co.'s chief operating officer, said on a May 5 earnings call. "It would take only a few parts to potentially cause some disruption into our production." Trump reached a de-escalation agreement with China on May 12. For 90 days, the United States lowered its tariffs on China to 30% from 145%, and China decreased its tariffs to 10% from 125%. China also committed to removing non-tariff countermeasures imposed since April 2 against the United States, which included suspending export controls on rare earths to 28 mostly U.S. aerospace, defense and tech companies for 90 days. The licensing requirements, however, have remained in place. The de-escalation, though, seems to have helped smooth over some of the processes in obtaining those critical minerals, said Collin Shaw, president of vehicle supplier association MEMA's original equipment suppliers group. "It was a pretty dire situation there for a minute that the supply chain was struggling to get those out of China," Shaw recently told the Automotive Press Association. "The administration did a great job negotiating, getting some relief there, not only on the tariff level, but also ensuring that some of the components can flow a little bit easier." But automakers and suppliers say the situation still isn't comfortable. In a statement, German auto supplier Robert Bosch GmbH described the application process for importing rare earths for its suppliers as "complex and time-consuming - partly due to the collection and provision of a large amount of data," but declined to go into details on its supply and logistics chain for competitive reasons. "Rare earths are essential for the production of, in particular, electric motors for electric vehicles and some sensors," spokesperson Tim Wieland said in the statement. "In the event of bottlenecks, we monitor the supply chains very closely and maintain regular contact to our suppliers and customers in order to minimize potential effects." Chinese reliance Rare earths are not uncommon. Their deposits, however, tend to be dispersed and not in concentrated amounts, making them more difficult to mine. The United States is the world's second-largest miner of rare-earth minerals behind China, producing almost 50,000 tons in 2024 compared to China's almost 298,000 tons, according to the U.S. Geological Survey. China also has enormous influence because most of the world's refining and downstream magnet manufacturing is done there. Ian Lange, a Colorado School of Mines mineral economist, said although there's plenty of "good dirt" in the United States and across the globe with rare earths, there often are environmental concerns around their mining, especially when they are found with radioactive uranium. China also has subsidized its production, allowing domestic suppliers to supply the elements for cheap and stunting investment elsewhere. "Every time," Lange said, "a U.S. firm is like, 'Hey, we've got this good rare-earth dirt, and we think we found a processor who can make it into what you want. Here's how much we think it would cost,' all the firms who might buy them go, 'Yeah, that's about 20% more than China. We can't really risk that.' "Finding a little bit better dirt doesn't change the fundamental equation that you can't compete with these subsidized monopolies," Lange added. Automakers and others reliant on rare earths likely are stockpiling in case China suddenly tries to pull U.S. access, Lange said. But a Chinese cutoff could force supply chains to move and the government to provide aid - if the Trump administration and Republicans are willing to save a commodity largely used for EVs and wind energy. "I'm guessing there would be an all-hands-on-deck, start-running situation," Lange said. "Between our stockpiles, our allies like Europe and Australia, and us starting to run, sure, it would kind of suck. But it's probably not the end of the world." Michael Silver, CEO of California-based American Elements, an advanced materials manufacturer that supplies the auto sector and other industries, however, says closing off the supply of rare earths would benefit no one. American Elements has imported rare earths from China for decades. The firm has the licensing needed to do so for 2025, Silver said, and expects soon to hear back on certification for 2026. "We're waiting for the other shoe to drop after these permits come out," Silver told The Detroit News, "to see if they decide, based on what's going on between the two countries and all the other negotiations, whether they're going to start using it as a process to restrict export volume." China has done so before, Silver said, and it's also used different prices of rare earths in China and in international markets to encourage companies to invest within its borders. Rare earths were less expensive in China than outside of it. In response, the United States, European Union and Japan filed action with the World Trade Organization, which ordered China to reestablish global pricing again in 2015. "We need to get back to multinational negotiations," Silver said, "where America uses the marketplace that China definitely wants to be in as leverage to say you can't operate in this fashion." Trump, however, has balked largely at agreements with multiple countries, saying they disadvantage the United States by compromising on certain issues to accommodate more than one country. "A commodity market can be manipulated by the one nation that has the dominant share of the material, and that's the issue," Silver said. "If a sovereign monopoly decides they want to put you out of business, you will be put out of business unless you can find someone who's going to subsidize your operation." The U.S. auto industry is in a particularly vulnerable position, said Nadia Schadlow, a senior fellow at the Hudson Institute, a think tank. The former U.S. deputy national security adviser for strategy said Chinese control of rare earths and rare earth processing means "a very important industry for the American economy can essentially be held hostage." "It's not surprising that the CCP (Chinese Communist Party) would want to use this as a form of leverage over the United States," Schadlow told The News. "They've done so in the past, even before the current tensions with President Trump over the current tariff discussions." But a total shutdown of rare-earths exports might not happen anytime soon, Schadlow said in an email, because Chinese officials want to maintain their leverage and keep options open with the United States. Other options Automakers like Ford have sought to reduce their use of rare earths. Some innovators like Niron Magnets in Minnesota, which has worked with General Motors Co. and Stellantis NV, are developing ways to produce magnets without rare earths. Others are taking on China. MP Materials in 2017 acquired an idled rare-earths mine in Mountain Pass, California, about 60 miles southwest of Las Vegas. Investing more than $1 billion in the United States, it has a facility there to separate and refine the materials, and a factory in Fort Worth, Texas, to produce metal and magnets from the elements. It's made its first deliveries of the metal to GM and expects to deliver magnets before the end of the year, which the Detroit automaker has said will be used in its EVs. GM also has an exclusive partnership with a Lithium Americas mine in Nevada and plans to source rare earth magnets from a South Carolina manufacturing plant owned by the German company Vacuumschmelze. "We'll continue to execute our plan to develop U.S. sources for battery cell and electric motor inputs like lithium, rare-earth metals, permanent magnets and cathode active materials," GM CEO Mary Barra said on a May 1 earnings call. China's April actions "effectively highlighted a major strategic weakness in that 90% plus or minus of rare earths that are made in China," Matt Sloustcher, MP Materials' executive vice president of corporate affairs, told The News. "It's an untenable supply-chain risk." A lack of investment and focus in the U.S. industry and cheaper operating costs in China contributed to the United States yielding the rare earths industry it developed to the Asian nation, Sloustcher said. Since April, with the world seeing the vulnerability of China having so much control, MP has had an avalanche of interest, he said. "With scale and time and investment, we'll be competitive," Sloustcher said, comparing expected costs to what Japan offers. "Magnets are being sold at roughly the cost of raw materials. That is a very difficult proposition to compete against in the United States. Our strategy is around resiliency and security of supply. When we build enough scale and efficiency where we can be competitive and combine our attributes to the supply chain, the value proposition is clear for the manufacturer." He added: "The reality is that if you don't have access to magnets, you're not making cars. That's a huge liability." Copyright (C) 2025, Tribune Content Agency, LLC. Portions copyrighted by the respective providers.
Miami Herald
17-05-2025
- Automotive
- Miami Herald
‘We need USMCA': Auto suppliers face distress from Trump tariffs
SOUTHFIELD, Michigan - Working to have the U.S. government honor conditions of the United States-Mexico-Canada trade agreement is a top priority for the vehicle suppliers' lobbying trade group, the association's leaders said Friday. "For the U.S. to be globally competitive, we need USMCA," Paul McCarthy, president-elect of MEMA and president of its aftermarket suppliers group, said before the Automotive Press Association. Supplier outlooks are down among MEMA's more than 1,000 members. Three quarters are expecting worse financial performances in 2025 than they had anticipated coming into 2025. With their median break-even point expected to be North American production of 14.5 million vehicles this year, up from 14 million because of tariffs, the industry is in a precarious position: Data firm S&P Global Mobility was predicting production at 13.9 million to 14.3 million ahead of President Donald Trump offering some relief measures late last month. "This is an industry under pressure, and our strategies, our investments are on hold, and that's not a good thing for what is the largest manufacturing sector in the U.S.," McCarthy said, noting suppliers contribute 2.5% of U.S. economic activity. Auto suppliers still are navigating a bunch of tariffs: President Donald Trump has instituted import taxes of 25% on steel and aluminum, 25% on certain auto parts and at least 10% on imports from most countries around the world with some of the heaviest on Canada and Mexico, where vehicle supply chains even for U.S.-produced vehicles are tightly woven. About 71% of imported materials and components used by MEMA's members are USMCA-compliant, and MEMA is providing resources to help more become compliant to avoid 25% tariffs. "We've all invested for the last 20 or 30 years into the North America supply chain," said Collin Shaw, president of MEMA's original equipment suppliers group, "and every country in USMCA offers something unique and has something to bring to the table to ensure that, from a competitiveness standpoint, we can compete with the rest of the world." He emphasized suppliers have added 61,000 U.S. manufacturing and salaried jobs in the years since Trump signed USMCA in 2020. "That is aligned with the administration's goals," McCarthy said, "that a strong U.S. requires a strong region to be competitive again." Although there are signs there should be strong auto demand as the average age of vehicles on the road increases, Shaw said, more than half of MEMA members report they are less competitive because of the tariff situation, and 53% are worried about sub-tier supplier distress as tariffs raise costs and are expected to increase vehicle prices. "New orders are down, and costs remain elevated," said Mike Jackson, MEMA's executive director of research and insights, "and this is a very tough situation for the supplier industry." Of MEMA members, 7% said they have implemented furloughs, 5% have instituted temporary wage reductions, 43% have delayed capital expenditure spending, 38% have restricted travel and 15% have taken other actions because of tariffs. "They can't see the complete picture," Jackson said, resulting in deferred spending. Some suppliers, though, say they are moving forward with investments. Paul Thomas, president of major auto supplier Robert Bosch GmbH in North America and of Bosch Mobility America, this week said the German manufacturer isn't holding off investing and is moving forward with $6 billion in announced U.S. investments since 2023. He, however, also emphasized the need for stability in trade policy. "I'm really focused on the future and the profitable growth opportunities for Bosch here in North America and specifically in the United States," Thomas said. "To achieve that growth, we are investing." Honoring USMCA and making tweaks as needed would help to offer the industry the stability it needs to make long-term decisions and hopefully provide opportunities to level the playing field for all suppliers looking to invest in the United States, Shaw said. He added that it's also risky to have production consolidated in one place: "We have to have that diversified supply chain so that we're not at risk, whether it's a supply chain shock like we saw with tsunamis, or geopolitical tensions like we're seeing today. We have to have a diversified supply chain." MEMA also is urging certainty on regulations of greenhouse tailpipe emissions. Trump has ordered a reevaluation of rules finalized by the Biden administration and is seeking to remove California's waiver allowing it to have stricter standards that 13 other states and Washington, D.C., have adopted. Delays on launches, production volume changes and less-than-expected demand for EVs have created challenges for suppliers too. MEMA also urges permitting reforms to increase the speed of U.S. expansion, retaining the Inflation Reduction Act that former President Joe Biden signed in 2022 that granted incentives to manufacturers of U.S. batteries, a "pro-business" tax environment, incentives for research and development and support to increase skilled tooling talent in the country, McCarthy said. He said the ability to deduct R&D spending proposed in the Ways and Means Committee's budget is a good step forward. "But that just brings us up to the rest of the world," McCarthy said. "It doesn't give us any advantage." Copyright (C) 2025, Tribune Content Agency, LLC. Portions copyrighted by the respective providers.
Yahoo
03-05-2025
- Automotive
- Yahoo
Another round of auto tariffs just went into effect. They could change the industry forever
The average car buyer doesn't think about where the parts in their vehicle come from – but automakers do. That's why a new round of auto tariffs – this time on parts – coming into effect Saturday could upend the industry, even more than previous levies on imported cars. As of 12:01 am ET on Saturday, most auto part imports will come with a 25% import tax. The previous auto tariffs left US-made cars untouched. Not anymore. Not a single of the 10 million cars turned out by US plants last year was built without at least some imported parts. The tariffs on parts could now mean tens of billions of dollars in new cost to the industry – and eventually to American car buyers and owners. 'Frankly, from my perspective, (the parts tariffs) looks worse for the broader economy than the tariffs on imported vehicles,' said Jonathan Smoke, chief economist at Cox Automotive, at an Automotive Press Association webinar this past week. More than 50% of the content of cars assembled in American auto plants is imported, according to the government's own estimates. But the tariffs won't apply equally to all those imports. For example, parts from Canadian or Mexican suppliers who pay their workers $16 or more an hour are deemed 'compliant' with the US-Mexico-Canada Agreement, a trade deal negotiated during the first Trump administration. That means most Canadian parts are exempt from tariffs, but relatively few Mexican parts. And as of last week, automakers assembling cars in the United States will be able to offset part of the parts tariff, at least temporarily. The White House said it would refund automakers up to 3.75% of price of the vehicle against their parts tariffs bill in the first year, sliding to 2.5% in the second year before being phased out in the third year. But even with that refund, the added cost of tariffs could still come to an average of about $4,000 per vehicle, according to estimates derived from a CNN analysis of government trade data. For car buyers, it might take awhile to see price hikes. General Motors CEO Mary Barra told CNN Thursday tariffs will cost her company between $4 billion and $5 billion this year, but she doesn't expect car prices to change in the near term. Ford CEO Jim Farley told CNN on Wednesday that it would extend its 'employee pricing' offer through July 4. But everyday Americans will still see higher prices elsewhere, like the repair shop. 'The tariffs on parts that will lead to higher inflation in repair and maintenance and insurance which impact every American and not just the people thinking about buying a new imported vehicle,' Smoke said. The recent change in the parts tariff rules means any car assembled in the United States with 85% 'USMCA compliant' parts would essentially be tariff-free. The problem is that virtually no vehicle meets that 85% threshold, according to analysis by Frank DuBois, a retired professor at American University's Kogod School of Business. That's because automakers have been operating for decades as if North America is a single market, moving parts repeatedly across the US borders with Canada and Mexico with few if any tariffs. Judging which content is actually domestic could be tough, as well, DuBois said, getting down to such minor points as where the oil and antifreeze come from. Besides the $19.2 billion in imported Canadian components, most other imported parts will not be exempt. For example, Mexico sent $82.5 billion in parts to the United States last year, by far the largest source of imported parts. But few of those are considered 'USMCA compliant,' so most will have the tariff attached. If current tariffs for auto parts (and additional levies for Chinese goods in general) had been in effect last year, the total price tag would have been about $60 billion. Even with the refund rules announced this past week would only have taken that bill down to $40 billion. The parts refund, Smoke said, is just about 'taking a bad situation and making it slightly less worse.'
Yahoo
03-05-2025
- Automotive
- Yahoo
Another round of auto tariffs just went into effect. They could change the industry forever
The average car buyer doesn't think about where the parts in their vehicle come from – but automakers do. That's why a new round of auto tariffs – this time on parts – coming into effect Saturday could upend the industry, even more than previous levies on imported cars. As of 12:01 am ET on Saturday, most auto part imports will come with a 25% import tax. The previous auto tariffs left US-made cars untouched. Not anymore. Not a single of the 10 million cars turned out by US plants last year was built without at least some imported parts. The tariffs on parts could now mean tens of billions of dollars in new cost to the industry – and eventually to American car buyers and owners. 'Frankly, from my perspective, (the parts tariffs) looks worse for the broader economy than the tariffs on imported vehicles,' said Jonathan Smoke, chief economist at Cox Automotive, at an Automotive Press Association webinar this past week. More than 50% of the content of cars assembled in American auto plants is imported, according to the government's own estimates. But the tariffs won't apply equally to all those imports. For example, parts from Canadian or Mexican suppliers who pay their workers $16 or more an hour are deemed 'compliant' with the US-Mexico-Canada Agreement, a trade deal negotiated during the first Trump administration. That means most Canadian parts are exempt from tariffs, but relatively few Mexican parts. And as of last week, automakers assembling cars in the United States will be able to offset part of the parts tariff, at least temporarily. The White House said it would refund automakers up to 3.75% of price of the vehicle against their parts tariffs bill in the first year, sliding to 2.5% in the second year before being phased out in the third year. But even with that refund, the added cost of tariffs could still come to an average of about $4,000 per vehicle, according to estimates derived from a CNN analysis of government trade data. For car buyers, it might take awhile to see price hikes. General Motors CEO Mary Barra told CNN Thursday tariffs will cost her company between $4 billion and $5 billion this year, but she doesn't expect car prices to change in the near term. Ford CEO Jim Farley told CNN on Wednesday that it would extend its 'employee pricing' offer through July 4. But everyday Americans will still see higher prices elsewhere, like the repair shop. 'The tariffs on parts that will lead to higher inflation in repair and maintenance and insurance which impact every American and not just the people thinking about buying a new imported vehicle,' Smoke said. The recent change in the parts tariff rules means any car assembled in the United States with 85% 'USMCA compliant' parts would essentially be tariff-free. The problem is that virtually no vehicle meets that 85% threshold, according to analysis by Frank DuBois, a retired professor at American University's Kogod School of Business. That's because automakers have been operating for decades as if North America is a single market, moving parts repeatedly across the US borders with Canada and Mexico with few if any tariffs. Judging which content is actually domestic could be tough, as well, DuBois said, getting down to such minor points as where the oil and antifreeze come from. Besides the $19.2 billion in imported Canadian components, most other imported parts will not be exempt. For example, Mexico sent $82.5 billion in parts to the United States last year, by far the largest source of imported parts. But few of those are considered 'USMCA compliant,' so most will have the tariff attached. If current tariffs for auto parts (and additional levies for Chinese goods in general) had been in effect last year, the total price tag would have been about $60 billion. Even with the refund rules announced this past week would only have taken that bill down to $40 billion. The parts refund, Smoke said, is just about 'taking a bad situation and making it slightly less worse.'
