President Trump, autonomous vehicles and digital retailing will shake up the automotive industry in 2017, affecting industry giants such as Ford (F) , General Motors (GM) and Toyota (TM) .
Let’s look at each of the trends that could disrupt the industry this year.
1. President Trump
If the Trump administration slaps tariffs on vehicles manufactured outside the U.S., it could have a significant effect on consumers, because it would increase the costs of imports and U.S.-made cars that use imported parts.
Trump has slammed U.S. carmakers for making vehicles in other countries and has threatened to hit them with steep tariffs. For example, early in January, he aimed the following tweet at General Motors:
General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border. Make in U.S.A.or pay big border tax!
– Donald J. Trump (@realDonaldTrump) January 3, 2017
During the presidential campaign, Trump said he wouldn’t allow Ford to build a planned $1.6 billion factory in Mexico, this Reuters article notes.
Early in January, Ford announced it had scrapped plans for that facility and said it would add 700 jobs in Michigan, although it’s not clear exactly how much of Ford’s motivation came from Trump’s criticism.
Ford CEO Mark Fields characterized the decision as a “vote of confidence” in Trump but said Ford would have cancelled the Mexican factory even if Trump hadn’t been elected because of declining demand for the small cars the facility would have made, Reuters said.
One of Trump’s most notable OEM targets is German manufacturer BMW. In an interview with German newspaper Bild shortly before the inauguration, Trump said, ”I would tell BMW that if you are building a factory in Mexico and plan to sell cars to the USA, without a 35 percent tax, then you can forget that.”
Prices of cars that are considered made in the U.S.A. could also rise, because many such cars have parts made in Mexico. Quartz recently reported:
“While Mexico’s passenger car exports to the US rank third, behind Canada and Japan, the country is the top foreign supplier of car parts to the United States, with shipments worth $51.6 billion in the first 11 months of last year, according to the US Census Bureau.”
All of this appears to spell uncertainty for both carmakers and consumers going forward and could affect investment choices that companies make.