Trump election: Issues facing the auto industry

Trump election: Issues facing the auto industry

With a change in parties coming to the White House, motor vehicles producers face possible shifts in policy.

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November 10, 2016

Cleveland, Ohio – With Donald Trump’s election as president Tuesday, motor vehicle industry watchers face lots of open questions. During his campaign, Trump was vocal in his criticism of automakers moving jobs to Mexico, foreign trade with certain countries, and industry regulation.

With inauguration day nearly two months away, it’s far too early to know what policies the new president will pursue, but here are some of the topics now in question.

Fuel economy – Presidents George W. Bush and Barack Obama pushed aggressive fuel economy standards with Obama calling for a near doubling of efficiency by 2025. Even without pushing new legislation, Trump can alter that policy approach significantly next year when regulators and automakers conduct the mid-cycle review of those fuel-economy targets. With new leadership at the U.S. Environmental Protection Agency, the government could decide that automakers have done enough to improve fuel economy, lowering the need to develop electric cars and fuel-sipping trucks. Possibly reflecting that policy shift, shares of Tesla Motors fell 2.5% Wednesday, a day when markets were up.

Mexico – The vast majority of vehicles sold in North America have parts made in Mexico, and automakers have been shifting production to that country for decades. By next year, Fiat Chrysler Automobiles won’t produce any cars in the United States, sending all of that work to Mexico. Its U.S. plants will build trucks, crossovers, and SUVs. Ford is in the midst of investing billions in Mexico to expand engine and vehicle production there. If Trump follows through on campaign promises to renegotiate the North American Free Trade Agreement, the economic viability of those plants could change.

Asian trade – Trump has promised to negotiate tougher trade terms with countries that send more goods to the United States than they buy. That description could fit major auto-producing countries such as Japan and Korea.

Investment programs – Tesla, Ford, and Nissan all took advantage of federal loan programs to fund plant investments geared at boosting fuel economy. The likelihood that other car companies will have access to such programs is likely lower with Trump in office – both because fuel economy targets will likely change and because those loan programs were unpopular with Republican lawmakers.

Some of Trump’s proposals could also benefit motor vehicle manufacturers. As recently as his acceptance speech early Wednesday morning, Trump reiterated calls for massive spending increases on U.S. infrastructure. That could lead to sales increases for trucks and off-highway equipment. Caterpillar stock jumped 7.7% higher Wednesday as investors theorized that a Trump presidency could boost equipment sales and coal production.

It’s still too early to tell how these issues will develop, but it’s clear that some policies will change following 12 years of increasing regulation and trade expansion.

Source: Donald Trump campaign speeches