As the Presidential election results settle, many industries are bracing for the impact of new policies, and the auto industry is no exception.
In today’s episode of Inside Automotive, we’re sitting down with Kevin Tynan, the Director of Research at Presidio Group, to discuss how new political policies could affect dealerships, consumers, and automakers.
A second Trump administration could lead to less stringent environmental regulations, which could ease some of the financial burdens on automakers as they face the challenges of moving towards costly electrification.
Despite the push for electrification, consumer demand has yet to match this trend, as trucks and SUVs continue to lead in popularity. Less severe requirements will allow automakers to recalibrate their focus and shift their attention to producing their more profitable vehicles. Tynan predicts that several automakers will pull back slightly from their electrification efforts, and the industry will become more organic, driven by genuine market trends instead of mandated environmental policies.
Trump’s intention to impose increased tariffs on imported cars and car parts is also a hot topic in the auto industry. Tynan predicts that these tariffs will cause inflation but could effectively address unfair trade practices such as “dumping” by other countries such as China and protect domestic automakers. The tariffs may also serve as a way to balance trade and prevent countries that overshoot production from off-loading excess inventory into the U.S. market.
He also underscores the overcapacity of the United States marketplace. Automakers are building more vehicles than can be sold, leading to an imbalance in supply and demand. Tariffs or government policies may take time to rectify these fundamental structural issues.
Tynan predicts that 2024 will be relatively flat regarding retail automotive performance, which is concerning. The overall industry kept hitting the 17 million mark for years, but this year, it is struggling to hit the 16 million unit mark. Despite this decline in sales overall, automakers continue to produce too many vehicles, leading to an imbalance in production and demand.
The auto industry may be entering a period of adjustment where the regulatory environment could grant manufacturers more freedom to concentrate on their core strengths. However, this shift may also slow the transition to electric vehicles (EVs). Structural issues, such as overcapacity and an ongoing emphasis on high-margin vehicles, could restrict growth opportunities, especially as the industry no longer benefits from high sales volumes of low-cost cars. Additionally, potential trade policies, particularly tariffs, could significantly impact the cost structures for both domestic and foreign manufacturers, ultimately affecting their competitive positions in the U.S. market.
"From the perspective of less intervention and smaller government... I'm a big believer in the invisible hand of the market.Let manufacturers do what they do for better or for worse, right decision, wrong decision, and let it be organic." – Kevin Tynan
