Latest news with #SinaGolara
Al Jazeera
13-08-2025
- Automotive
- Al Jazeera
US car sales slow after tariff-driven buying surge ends
After a wave of rushed buying, driven by looming tariffs, US car sales have started to slow, weighing on carmakers. New car sales fell by 300,000 in June from 15.6 million to 15.3 million, according to data released by Cox Automotive last month. 'Now we've got sales slowing because [the pre-tariff buying] surge pretty much pulled ahead a lot of people that might have been in the market this year, who wanted to buy before tariffs hit,' Mark Schirmer, director of industry insights at Cox Automotive, told Al Jazeera. This will only get harder for carmakers, dealerships and shoppers down the road. 'Price rises together with demand destruction,' Sina Golara, assistant professor of supply chain management at Georgia State's Robinson College of Business, told Al Jazeera. 'If consumers don't have the resilience to pay for those higher prices, they'll take a step back.' United States President Donald Trump's erratic approach to tariffs, putting some in place and then taking them away, has made it difficult for businesses to plan. In April, car companies, including Stellantis, Ford and Volvo, suspended financial guidance as a result of the uncertainty. Last month Volvo also said that tariffs will cost it $1.2bn in the second quarter. Ford then announced it expects a reduced annual profits to $3bn after taking an $800m hit from tariffs in the second quarter. GM announced that it expects a $5bn hit, and Toyota said it expects $9.5bn in tariff-driven blows to profits for the year. In May, Ford also announced it would have to raise prices on some of its cars made in Mexico, including the Mustang Mach-E electric SUV, Maverick pick-up truck and Bronco Sport, in some cases by as much as $2,000, the Reuters news agency reported. Those cars began to reach lots last month. As a result, consumers are overwhelmingly opting for used cars that are not subject to tariffs, including foreign-made ones, as they are already on US roads. Used car sales are up 2.3 percent from this time last year, according to Used Car Index report, an auto industry insight platform by Edmunds. In part, this is because of the limited supply of used cars. Edmunds's report says that buyers, and sellers looking to upgrade but need the money from sale of a current car, are hesitant about undertaking expenses amid economic uncertainty. The bigger impact of both those trends is of inventory piling up. On average, dealerships have 82 days worth of cars on the lot, a roughly 14 percent increase between May and June. An expensive escalation Cox forecasts prices could rise anywhere between 4 to 8 percent over the next six months as a result of the tariffs. The group expects new car sales of 13 million to 13.3 million this year. 'Tariffs will be inflationary on both the new and used vehicle market,' Schirmer said, adding, the main challenge right now is the unsold inventory that's piling up. Analysts believe that prices will continue to rise amid Trump's tariffs, especially as companies try to move supply chains to the US, as demanded by Trump, an effort that is years in the making. 'The tariff 'relief' is like putting a band-aid on a bullet wound with US car companies now dealing with the repercussions moving forward as this Twilight Zone situation will change the paradigm for the US auto industry for years to come,' Dan Ives, analyst at Wedbush Securities, said in a note provided to Al Jazeera. In the meantime, the cost to import a car is expected to increase by $1,000 this year to $5,700, according to Cox Automotive. 'The US imports a little less than half of the new vehicles sold, but dependence on imports varies substantially by segment. The most dependent segments are at the two ends of the price spectrum – the most affordable vehicles and luxury vehicles. Most of the vehicles priced under $30,000 would face added costs that would make them unaffordable,' Cox Automotive chief economist Jonathan Smoke said in a June conference call shared with Al Jazeera. EVs hit hard Trump's new tax legislation – signed into law last month and which cut the EV tax credit of up to $7,500 – has already led to a significant pullback specifically for the electric vehicle marketplace as demand for the products begins to fall. 'Our forecast had been for approximately 10 percent of new vehicle sales this year to be EV. We slightly lowered that to 9 percent,' Schirmer added. Volvo reported a 26 percent decline in sales for electric vehicles (12 percent overall). Ford EV sales tumbled by 31 percent. Rivian saw sales decline by 23 percent. Tesla saw a decline of 13.5 percent globally as CEO Elon Musk's political involvement hindered the brand's reputation. The cuts to the EV tax credit is expected to cost Tesla $1.2bn every year, JP Morgan forecast. 'Several dealers have also stated that these [EV tax credits] are the main drivers [for consumers]. So without those incentives, there would definitely be a significant hit through EV sales,' Golara added. General Motors has been the exception to the rule. The Michigan-based auto giant doubled its EV sales in recent months. Despite the dip in sales, Golora believes that the setback in the EV market is temporary. 'It's [the EV market] still compelling in the long run because many manufacturers have already reached a decision that this is where the industry is going,' Golara said. 'Investment [in EV production] doesn't look like a lost one. The payback period will be longer.' Manufacturing strains While US manufacturing ticked up overall in June, when it comes to motor vehicle and parts production, it is a different story. Production tumbled by 2.6 percent for the month as demand began to slow. US auto manufacturing employment is also down. According to the Bureau of Labor Statistics, employment in auto manufacturing in the United States has tumbled by 35.7 percent since this time last year and down 2.4 percent from this time last month. Al Jazeera reached out to the United Auto Workers for comment about the effect on car manufacturing jobs, but the organisation did not respond. 'Demand was not growing as fast as needed, and many manufacturers were caught by surprise. That's a problem, and it is kind of a longer-term, structural issue,' Golara said.
Al Jazeera
13-08-2025
- Automotive
- Al Jazeera
Automakers brace for profit hits in anticipation of tariff price hikes
After a wave of rushed buying, driven by looming tariffs, US car sales have started to slow, weighing on carmakers. New car sales fell by 300,000 in June from 15.6 million to 15.3 million, according to data released by Cox Automotive last month. 'Now we've got sales slowing because [the pre-tariff buying] surge pretty much pulled ahead a lot of people that might have been in the market this year, who wanted to buy before tariffs hit,' Mark Schirmer, director of industry insights at Cox Automotive, told Al Jazeera. This will only get harder for carmakers, dealerships and shoppers down the road. 'Price rises together with demand destruction,' Sina Golara, assistant professor of supply chain management at Georgia State's Robinson College of Business, told Al Jazeera. 'If consumers don't have the resilience to pay for those higher prices, they'll take a step back.' United States President Donald Trump's erratic approach to tariffs, putting some in place and then taking them away, has made it difficult for businesses to plan. In April, car companies, including Stellantis, Ford and Volvo, suspended financial guidance as a result of the uncertainty. Last month Volvo also said that tariffs will cost it $1.2bn in the second quarter. Ford then announced it expects a reduced annual profits to $3bn after taking an $800m hit from tariffs in the second quarter. GM announced that it expects a $5bn hit, and Toyota said it expects $9.5bn in tariff-driven blows to profits for the year. In May, Ford also announced it would have to raise prices on some of its cars made in Mexico, including the Mustang Mach-E electric SUV, Maverick pick-up truck and Bronco Sport, in some cases by as much as $2,000, the Reuters news agency reported. Those cars began to reach lots last month. As a result, consumers are overwhelmingly opting for used cars that are not subject to tariffs, including foreign-made ones, as they are already on US roads. Used car sales are up 2.3 percent from this time last year, according to Used Car Index report, an auto industry insight platform by Edmunds. In part, this is because of the limited supply of used cars. Edmunds's report says that buyers, and sellers looking to upgrade but need the money from sale of a current car, are hesitant about undertaking expenses amid economic uncertainty. The bigger impact of both those trends is of inventory piling up. On average, dealerships have 82 days worth of cars on the lot, a roughly 14 percent increase between May and June. An expensive escalation Cox forecasts prices could rise anywhere between 4 to 8 percent over the next six months as a result of the tariffs. The group expects new car sales of 13 million to 13.3 million this year. 'Tariffs will be inflationary on both the new and used vehicle market,' Schirmer said, adding, the main challenge right now is the unsold inventory that's piling up. Analysts believe that prices will continue to rise amid Trump's tariffs, especially as companies try to move supply chains to the US, as demanded by Trump, an effort that is years in the making. 'The tariff 'relief' is like putting a band-aid on a bullet wound with US car companies now dealing with the repercussions moving forward as this Twilight Zone situation will change the paradigm for the US auto industry for years to come,' Dan Ives, analyst at Wedbush Securities, said in a note provided to Al Jazeera. In the meantime, the cost to import a car is expected to increase by $1,000 this year to $5,700, according to Cox Automotive. 'The US imports a little less than half of the new vehicles sold, but dependence on imports varies substantially by segment. The most dependent segments are at the two ends of the price spectrum – the most affordable vehicles and luxury vehicles. Most of the vehicles priced under $30,000 would face added costs that would make them unaffordable,' Cox Automotive chief economist Jonathan Smoke said in a June conference call shared with Al Jazeera. EVs hit hard Trump's new tax legislation – signed into law last month and which cut the EV tax credit of up to $7,500 – has already led to a significant pullback specifically for the electric vehicle marketplace as demand for the products begins to fall. 'Our forecast had been for approximately 10 percent of new vehicle sales this year to be EV. We slightly lowered that to 9 percent,' Schirmer added. Volvo reported a 26 percent decline in sales for electric vehicles (12 percent overall). Ford EV sales tumbled by 31 percent. Rivian saw sales decline by 23 percent. Tesla saw a decline of 13.5 percent globally as CEO Elon Musk's political involvement hindered the brand's reputation. The cuts to the EV tax credit is expected to cost Tesla $1.2bn every year, JP Morgan forecast. 'Several dealers have also stated that these [EV tax credits] are the main drivers [for consumers]. So without those incentives, there would definitely be a significant hit through EV sales,' Golara added. General Motors has been the exception to the rule. The Michigan-based auto giant doubled its EV sales in recent months. Despite the dip in sales, Golora believes that the setback in the EV market is temporary. 'It's [the EV market] still compelling in the long run because many manufacturers have already reached a decision that this is where the industry is going,' Golara said. 'Investment [in EV production] doesn't look like a lost one. The payback period will be longer.' Manufacturing strains While US manufacturing ticked up overall in June, when it comes to motor vehicle and parts production, it is a different story. Production tumbled by 2.6 percent for the month as demand began to slow. US auto manufacturing employment is also down. According to the Bureau of Labor Statistics, employment in auto manufacturing in the United States has tumbled by 35.7 percent since this time last year and down 2.4 percent from this time last month. Al Jazeera reached out to the United Auto Workers for comment about the effect on car manufacturing jobs, but the organisation did not respond. 'Demand was not growing as fast as needed, and many manufacturers were caught by surprise. That's a problem, and it is kind of a longer-term, structural issue,' Golara said.
CBS News
13-05-2025
- Business
- CBS News
U.S.-China tariff truce offers temporary relief — and plenty of uncertainty
A tariff truce between the U.S. and China announced on Monday will offer companies some relief, but also prolong the kind of economic uncertainty that makes it hard for businesses to plan for the future. Beginning May 14, the U.S. will lower its maximum tariff rate on Chinese imports from 145% to 30%, including a 10% baseline levy plus a fentanyl-specific 20% levy. China will reduce its 125% tariff on American goods to 10%. But clinching a long-term trade deal is likely to prove challenging, while the reduced 30% tariff rate could still lead to price hikes for consumers, experts told CBS MoneyWatch. "It remains to be seen whether the U.S. and China can agree to a trade deal that keeps tariffs from rebounding in 90 days," analysts with Gavekal, an investment research firm, said in a report. "So far, only the U.K. has reached an agreement with the U.S., and that doesn't tell us much." Is the 30% tariff permanent? No. Absent a formal trade deal, there's no guarantee that President Trump won't again raise tariffs on China once the truce expires after 90 days and that Beijing won't also retaliate. U.S. Treasury Secretary Scott Bessent called the new baseline tariff a "floor" in an interview with Bloomberg Surveillance. "This is just a 90-day pause that allows the two countries to work toward a deal," supply-chain expert Sina Golara, an assistant professor at Georgia State University's Robinson College of Business, told CBS MoneyWatch. Is a 30% tariff on Chinese imports still high? Under the agreement, the U.S. will lower tariffs on Chinese goods from as much as 145% to 30%. Still, that represents a steep hike on the level of U.S. levies on China before Mr. Trump took office. "If you look at where we were pre-'Liberation Day' or when Trump took office, this 'agreement' is just a baseline tariff increase to 30% across the board," said Alex Jacquez, chief of policy and advocacy at Groundwork Collaborative, a left-leaning public policy think tank, referring to the phrase President Trump used in announcing a barrage of tariffs on April 2. "While it's a walk-back from the prohibitive 145% tariffs, it still leaves us no closer to any concessions or renegotiations vis-à-vis China than we were." Tariff rates aren't the only potential sticking points as the countries continue to negotiate. "The two countries have a lot of grievances in many dimensions, so it's not just tariff rates," Golara noted. "It's where they strand on other trade barriers, the trade imbalance, and the U.S. accusing China of currency manipulation, so there's a lot to discuss. It makes sense for them to want to take more time." What does the U.S-China truce mean for economic growth? There's good news here: If both countries' reduced tariffs remain in place, consumer confidence is likely to improve and boost spending. That should help contain U.S. inflation and help support the job market, according to Oxford Economics associate economist Grace Zwemmer. The announcement also reduces the odds of the U.S. economy entering a recession this year, according to experts. Oxford Economics chief U.S. economist Ryan Sweet lowered his forecast for a recession to 35% from more than 50%. Will shipments from China start flowing again? Large and small businesses alike in the U.S. have warned that higher tariffs will raise consumer prices, while some companies have canceled orders from Chinese factories because of the high levies. "It's very clear that Trump was staring down the barrel of a huge drop in imports from China across the busiest shipping season, as companies build inventory for Christmas and the holiday season," Groundwork Collaborative's Jacquez told CBS MoneyWatch. "There were more announcements from companies about burning through their inventory and having to pass costs to customers, or having to cease importing from China." Freight shipments from China are expected to surge during the 90-day tariff pause, as companies bulk up their inventories to guard against the trade talks foundering and levies rising. As a result, shipping rates will rise, and squeeze smaller businesses, whose margins are already thin. "Right now, you'll see a huge rush in trying to get imports in from China in this 90-day period. That will strain shipping logistics just as it did in Covid, when everything opened back up," Jacquez said. Will consumer prices still rise? Businesses still face added costs with 30% tariffs in place, and they are likely to pass some of those expense onto consumers. But the price hikes could be less substantial depending on how companies handle tariffs, according to Georgia State University's Golara. "If we have a mix of some companies handling tariffs well, we won't see broad-based inflation rise to a painful level. We might see pocketed effects in different and specific products and sectors," he said. Other experts agree the pause is good news for companies and consumers. "The tariffs were so punishing that it was creating this incentive not to import anything from China," Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University told CBS MoneyWatch. "The announcement is also good news because it means supply is not going to be as restrained as it was." It doesn't mean the U.S. it completely out of the woods, though. "It's still a significant increase in taxes for American consumers. We are still in a worse position than we were," de Rugy said. How are companies reacting? Businesses are still grappling with significant economic uncertainty, making it hard to plan for the future. "If you're a small business and don't know what your inputs will cost next week or in 90 days, it's going to be extremely difficult to do business in this uncertain environment," Jacquez said. Kim Vaccarella, founder and CEO of Bogg, a U.S-based beach bag and accessories company that makes its products in China, has been scrambling to shift at least some of its manufacturing to Vietnam and Sri Lanka because of the Trump administration's stepped-up tariffs. "We were looking at alternatives and set up viable sources in both countries, and we were working toward manufacturing there," she told CBS MoneyWatch. Then came The White House's announcement on Monday. With the U.S. earlier this year having raised its country-based tariffs on Vietnam and Sri Lanka to o46% and 44%, respectively, China may again be Vaccarella's best option. "Now we are back to square one, because at 30% it's less expensive to manufacture in China," she said. "If tariffs stay at 30% or go lower, it just looks like we spent a lot of money quickly trying to ramp up production somewhere else, because that would have been more acceptable under this current nightmare." Vaccarella had warned customers that the price of Bogg bags could jump as early as July. "But 30% we can work with," she said. "There might have to be a small increase, but it won't be what it would have been at 145%."
