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The US auto industry is looking forward to Donald Trump’s presidency. There will likely be a big corporate tax cut and a renegotiation of the timetable for requiring car companies to meet more stringent fuel-economy standards, both of which will be a positive for the carmakers’ businesses.
The industry also expects Trump to make good on his campaign promise to impose a border tax on vehicles and parts imported from Mexico and Canada for sale in the US.
But there are indications that any tax will be subject to discussion and debate in terms of how its implemented.
Meanwhile, the carmakers have be announcing modest hiring and investments in US plants, lending the Tweeter in Chief some easy, early wins.
GM CEO Mary Barra is on Trump’s council of business leaders, and Ford CEO Mark Fields has joined Trump’s manufacturing initiative. Tesla CEO Elon Musk is involved with both.
From the outside, it looks like the US auto industry has crafted a deal with Trump – and is also looks as if the deal strongly favors their interests, at Trump’s expense. Obviously, it remains to be seen how it will all shake out, and Trump isn’t doing auto executives any favors by charging forward with his immigration ban and forcing CEOs and companies to issues official statements on the order.
But there’s a larger problem that could make trouble for automakers, especially as they head into a US sales downturn over the next 12 to 18 months.
- Justin Sullivan/Getty
Buying or leasing a car or truck is all about confidence – specifically, it’s about confidence in the future. A person who buys a new vehicle and spends on average over $33,000 is a person who feels optimistic about the next few years. He or she needs to know that they economy will be stable enough to support the employment that yields the income that goes toward the payments.
The auto industry has also begun to increasingly stress its role is a truly exciting future for humanity, it terms of the transformation of mobility that’s currently underway. Fresh off two meetings with Trump, Mark Fields visited Business Insider’s New York office and repeated his view that the company is looking more than a decade into the future when considering its destiny, its business strategies, and its responsibilities to society.
A less bright future?
Car companies have always trafficked in futurism – they used to be famous for rolling out “dream cars” at auto shows – but now they’re embracing a more high-tech, change-the-world perspective. And, crucially, asking their employees, dealers, and customers to come along for the ride.
Just about two weeks into governing, however, the Trump administration is starting to show a big crack between its generally good relationship with the business community and its rapidly degrading relationship with everyone else. Some companies are getting caught in the middle; Silicon Valley CEOs had to rush to condemn the executive order banning Syrian refugees from entering the US, as well as immigrants from a list of predominantly Muslim countries.
We could have seen this coming. Getting cozy with business is a Republican thing to do – nothing unusual there. But many of Trump’s other moves have been politically incendiary. This is bad because the last thing that the pro-business GOP wants is for millions of customers to think that everything is going to pieces, and fast.
The auto industry will feel this acutely. If you’re angry or scared, and you aren’t sure what’s going in Washington, you may hold off on committing to new car payments for five or more years. Consumer sentiment is called that for a reason.
A downturn is coming
The automakers also know that although sales in the US are continuing to boom, setting records two years in a row, they will decline at some point. In that environment, customers don’t need unexpected reasons to not buy.
But Trump is backed into a corner here. By campaigning on a message that America was broken, he now has to cast his remedies in terms that will imagine pain and suffering. This is difficult because if you look at it by the numbers the US economy is at full employment, car sales are setting records, and the stock market is way, way up.
So ultimately, Trump’s messaging could hurt the automakers, who would very much like to see optimism run high for another year, bolstering sales and balance sheets alike. Unfortunately, the past two weeks have shown that they may not be able to envision a future that’s quite as bright as they need it to be.