US president-elect Donald Trump’s populist approach to trade has the world’s carmakers on the edge of their seats, with the industry gathering in Detroit for the North American International Auto Show.
The largest US car show opens Monday, and Trump takes office January 20.
US car sales hit a record 17.54 million vehicles in 2016, according to statistics compiled last week by the trade magazine Automotive News. It was a seventh consecutive year of sales growth since the 2007-09 recessions in the United States.
Trump has vowed to cancel or renegotiate US trade agreements, including the Trans-Pacific Partnership and the North American Free Trade Agreement.
His opposition to trade agreements has seeded political uncertainty for the globally integrated automotive industry. In the US market, domestic and foreign carmakers alike manage complicated supply chains in which parts and assembly flow relatively freely across borders.
Italian-American carmaker Fiat Chrysler Automobiles late Sunday announced plans to invest 1 billion dollars in its US-based Jeep brand. The production expansion is expected to add more than 2,000 jobs by 2020 at existing factories in Michigan and neighbouring Ohio – both industrial heartland states won by Trump in November.
The project will see production of the Dodge Ram pickup truck shifted from Mexico to Warren, Michigan, just north of Detroit.
Fiat Chrysler chief executive Sergio Marchionne said the company is bolstering its US capacity as “a global manufacturing hub” for the sport-utility vehicle and pickup truck markets.
The investments have been under discussion “for some time” and will help Fiat Chrysler to “meet growing demand here in the US but more importantly to increase exports of our mid-size and larger vehicles to international markets.”
Michelle Krebs, senior analyst for the website Autotrader.com, said that the car industry’s reaction since Trump’s unexpected election victory in November has been “a little bit unnerving.”
Companies appear to be making decisions about product lines and production that “may not be the best for the consumer and the automakers,” she told reporters Sunday in Detroit.
US-based Ford Motor Company last week cancelled plans to build a 1.6-billion-dollar small-car plant in Mexico. Instead, Ford will spend 700 million dollars to expand an existing Michigan factory.
Trump on Twitter thanked Ford for “creating 700 new jobs in the US. This is just the beginning – much more to follow.”
The company, though, insists that the switch was a business move in response to tepid demand for smaller cars in the US, where sport utility vehicles (SUVs) and pickup trucks continue to dominate the market.
Ford has not been Trump’s only target in the automotive sector.
Last week he complained about General Motors shipping its Mexican-assembled subcompact Chevrolet Cruze tariff-free into the US. “Make in U.S.A. or pay big border tax!” he tweeted.
In fact, most of the Cruze production in Mexico is for international markets, with more than 90 per cent of US-sold Cruze models assembled at a GM plant in Ohio, the company said.
During his presidential campaign, Trump threatened to impose a 35-per-cent tariff on US manufacturers building cars on foreign soil for import into the US market.
Sandy Schwartz, president of market analysis firm Cox Automotive, said that Trump in office will soon find that such steep tariffs are politically impossible.
“Now reality is gonna hit,” he told reporters Sunday in Detroit. “Now we will find out that not everything he says can be done. … Yes, people are nervous [in the car industry], but I think things will settle down.”
Karl Brauer, publisher of car valuation website Kelly Blue Book, warned of a “huge negative backlash” if Trump’s protectionist manufacturing policies cause car prices to rise.
“Trump will backpedal big time,” he predicted.
The uncertainty about future US trade policy comes with US car sales at a plateau after years of rapid growth since the collapse of the market during the last recession. The 2016 record was up only 0.3 per cent over 2015.
Cox Automotive forecasts that US car sales will remain “strong” this year but likely fall short of 2016’s record.
An inventory “glut” has created a “a shopper’s delight,” Schwartz said. Discounts and rebates could keep consumers interested, but at the expense of carmakers’ bottom lines.