The auto industry has learned to live with an orderly, predictable and at times even supportive administration under U.S. President Barack Obama over the past eight years. Under President Donald Trump, the industry can expect something very different.
Indeed, if President Trump remains true to his campaign promises, much of what has shaped the auto industry over the past eight years will begin to unravel in 2017.
A Trump presidency has enormous implications for the industry in Canada.
Transport Canada recognizes the “integrated nature” of the automo-tive industry, and admits to harmonizing regulations “as much as possible” with the United States. What happens under President Trump’s administration will directly impactthe auto industry in Canada and the vehicles Canadians can buy.
Indeed, while Transport Canada says it “works with the other major vehicle manufacturing countries at the United Nations to develop global technical regulations,” it always circles back to this priority: harmonize Canadian regulatory requirements with those of the United States.
What lies ahead on the regulatory front is of enormous importance to an industry whose products come to market after five-plus years of planning and development, hundreds of millions if not billions of dollars in spending, and with an expected on-the-road life cycle of 15 years or more.
Given those facts, the coming year is worrisome if not downright troubling. Car companies need to know that they are making the right product and technology bets so that what comes to market years later will be acceptable to regulators and politicians, as well as popular with buyers.
Soon after taking office in 2009, President Barack Obama began work on two huge auto initiatives. First, he pushed ahead with a successful bailout of General Motors and the then-Chrysler Corp. The second recognized the imperatives of the industry while mandating dramatic improvements in fuel economy.
Obama’s White House initiated a drive for a fleet-wide standard of 35.5 miles per U.S. gallon by 2016. This was followed by an agreement with 13 major automakers that set the standard at 54.5 mpg — 163 grams/mile of carbon dioxide — by 2025.
Obama argued that his intent was not to further burden an already struggling industry but instead “help America’s automakers prepare for the future.” The industry was not thrilled, but it had certainty and consistency to guide future product plans that have resulted in massive technological change and a global move to electrification to cut emissions and advance fuel economy.
The incoming president, however, has called global warming a Chinese hoax – thus undermining Obama’s fuel-economy mandates – and said the North American Free Trade Agreement (NAFTA) that has shaped industry investment for two decades should be shredded or renegotiated.
Because he views NAFTA as a failure, President-elect Trump has threatened to unilaterally apply new tariffs on imports from China and Mexico that could result in a trade war, hurting Detroit-based automakers in particular and global ones more generally.
As a climate-change denier, Trump has said he would neuter rules designed to lower carbon-dioxide levels and relax fuel-economy and emissions rules put in place by President Obama.
A Trump administration dwarfs other predictions for 2017, but based on what happened in 2016, there are three other huge developments:
LUXURY BRANDS ON FIRE: Hyundai launched its Genesis brand in late 2016, promising personalized service for customers who get value in stylish and technologically advanced vehicles. Established luxury brands will adopt the best parts of Genesis customer service. When Genesis offers luxury utility vehicles, fireworks will ensue; all significant growth in the luxury segment is in light trucks, not passenger cars.
ELECTRIFICATION: 2017 will be a banner year for EVs. Full-scale production of the Chevrolet Bolt will be under way, Tesla says it will introduce the budget-friendly Model 3, Nissan will reinvent the Leaf and a host of other plug-in developments will ensue. A new report from Morgan Stanley predicts EVs will comprise 10 to 15 per cent of global new-car sales by 2025. The big moves begin in 2017.
CONSOLIDATION AND COOPERATION: FCA is teaming with Amazon to sell cars online. BMW, Daimler, Ford, with Volkswagen (and its brands Audi and Porsche) are partnering to create an “ultra-fast high-powered” charging network in Europe. Renault-Nissan and Daimler are joining forces on all sorts of projects. Mazda and FCA are cooperating on sports cars. Toyota owns significant chunks of Subaru and Mazda. A long list of car companies are engaged in car-sharing operations and enlisting the technological expertise of high-tech companies in Silicon Valley and elsewhere. Expect this trend to accelerate in 2017 and beyond.