It’s a line I’ve heard from more than one auto industry executive: “We don’t build cars just to meet regulations.” In other words, the carmaking game is all about great products at competitive prices, not simply tailoring everything to meet some government’s ever-shifting safety and emissions rules.
Reader, that’s a lie. In reality, the car industry is one of the most heavily regulated ones on earth, and the rules dictate everything from how your next car will be shaped to how clean it will be. The car companies get tight little boxes to operate in, and they spend years and billions of dollars in capital trying to make profitable cars that can also meet all those rules.
But six months into the Trump administration, those rules—ones that the auto industry in America has been operating under for years, and in some cases decades—are out the window now. And what happens next is anybody’s guess.
A look at this chaotic situation kicks off this Monday edition of Critical Materials, our morning roundup of industry and technology news. Also on deck: Stellantis gets a steep tariff bill, and questions arise about how Huawei-powered cars are being sold in China. Let’s dig in.
30%: Everything Is Weird
2023 Volkswagen ID.4 exterior rear view inside Chattanooga factory
I’ll summarize this situation as succinctly as I can: here in the United States, tariffs are in, electric vehicle tax credits are out (or will be on Sept. 30, anyway), penalties that pushed for more fuel-efficient engines are dead, and the global supply chains are still unpredictable. The Trump administration has sought to radically re-shore car production in America—gas car production, specifically—while rolling back fuel economy rules, emissions regulations and policies driving EV growth.
Basically, this wasn’t the plan for the auto industry in America. It’s spent years gearing up for a more electric and electrified future under the Biden administration—and decades of ever-stricter fuel economy and emissions rules before that—including locally made EVs and U.S. battery plants.
And the tariffs mean that no car company is entirely sure where to build cars now, let alone how to price them. Here’s Automotive News with more:
To put it plainly, vehicle product planners are trying to steer through a bumpy ride. “The next four-plus years will be the most uncertain and volatile time in product strategy ever,” Bank of America analysts wrote in their annual Car Wars study in June.
By the time EV and trade policy become clearer, the auto industry probably will have lost as much as 18 months of planning, said Michael Robinet, vice president of forecast strategy at S&P Global Mobility.
“There has been a colossal effort to just reduce exposure and try to control what you can control,” Robinet said. “Companies are all trying to plan day to day and have very little, if any, long-term focus on where technology, efficiency and all those factors that we used to invest a lot of time and energy in end up.”
Automotive News puts together an annual look at the next few years of product strategies for each car company. Plans always shift, but in 2025, creating a roadmap is an especially unenviable job.
Arguably the worst part for carmakers is that the world’s biggest car markets—including the U.S., Europe, China, the rest of Asia and so on—are all moving at different speeds now toward the technologies of the future. So is the play gas, hybrid or electric? Actually, it’s all of the above:
Different segments of the market will demand a variety of powertrains, so “the investment is going to have to be made everywhere,” said Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions. “Some of that money is going to be spent prematurely and some of that money is going to be spent too late, but everybody is going to have to spend it.”
“If you can’t even handicap what’s going to happen day-to-day because it feels like these decisions aren’t tied to macroeconomic fundamentals but to some negotiation that you’re not a part of, you go from being a participant in the economy to a hostage,” [Dan Hearsch, global co-leader of the automotive and industrial practice at AlixPartners] said.
“You’re just watching people negotiate with your life. That’s the situation that we’re finding ourselves in, waiting to see what these different governments do.”
I can’t tell you where this nets out long-term, but in the immediate term, new-car affordability is probably going out the window.
60%: Stellantis Braces For A $2.7 Billion Tariff Hit Already
Photo by: Ram
Case in point: Jeep, Ram and Fiat parent company Stellantis, which operates many U.S. plants but is deeply international and was already struggling with sagging sales. Now, tariffs alone have it facing a $2.7 billion bill as it rethinks a lot of future plans, reports Reuters. A year ago it was turning a $6.5 billion profit in the first half; not so much these days.
Stellantis said on Monday it booked 3.3 billion euros in pre-tax charges for the first half as it cancelled programmes, including a hydrogen fuel cell project, kept setting aside money for fines linked to U.S. pre-Trump carbon emission regulation, while investing more in popular hybrid cars in Europe and large gasoline-powered models in the U.S. market.
The automaker’s results were “worse than consensus, but we think poor numbers were anticipated,” Jefferies analyst Philippe Houchois wrote in a client note. Bernstein analysts said that despite a “big” earnings miss, restructuring steps taken by Stellantis “suggest decisive actions.”
[…] Last year, Stellantis imported over 40% of the 1.2 million vehicles it sold in the United States, mostly from Mexico and Canada. In April this year, the company said it had reduced vehicle imports in response to tariffs and would calibrate “production and employment to reduce impacts on profitability”.
Quite a turnaround job for the new CEO.
90%: The Curious Case Of Huawei EV Subsidies In China
Photo by: Patrick George
Meanwhile, China’s EVs may be hyper-advanced, but that industry has giant headaches of its own: price wars, waning demand, too many brands and too much competition, a nervous national government and much more.
So let’s talk about Huawei. I would argue that it hasn’t been as flashy as Xiaomi has been in this regard, but it’s another Chinese smartphone and tech giant getting into the EV space—both with its own software and by white-labeling cars made by other automakers. Huawei’s Harmony Intelligent Mobility Alliance (HIMA) works with Chinese players like SAIC, JAC and Chery to build out new brands quickly.
But Wired points out that it’s getting a lot of government help to do this—like, an unusual and specific degree of government help, even by China’s standards:
Since May, at least 10 Chinese provincial and municipal governments have announced consumer subsidies ranging from 2,000 to 5,000 RMB (about $280 to $700) per car, according to social media posts collected by WIRED. The exact amount and conditions vary, but they all have one thing in common: The rebates can only be used to purchase a vehicle that runs Huawei’s HarmonyOS operating system and its autonomous driving system.
The Chinese government has subsidized electric vehicles since 2009, helping drive the country’s rapid adoption of them over the past decade. But those incentives, both on the national and local level, were phased out two years ago as the government urged auto companies to reach profitability on their own. But even during the heyday of EV discounts, experts say they were never explicitly restricted to a single company.
It remains unclear which company or organization is actually funding the discounts in every case. It could be Huawei, as all the announcements clearly benefit it, or one of the auto manufacturers that have partnered with it and uses Huawei’s smart driving technologies.
That story’s worth a read in full.
My take is that it’s another sign of how volatile and cutthroat the Chinese EV market is. The level of brand overabundance and factory overcapacity we see right now cannot last forever. Until then, these companies will do damn near anything to get ahead, even by inches instead of miles.
100%: Are There Any Winners In This Current Moment Of Industry Chaos?
Photo by: Ralph Hermens
“In the midst of chaos, there is also opportunity,” Sun Tzu wrote in The Art of War. What opportunity exists amid all this chaos and who’s going to be smart enough to seize on it?
The auto industry’s big problem is still affordability. Forget EVs for a second; this business is in trouble if a Nissan Sentra or something costs $30,000. If some company can really figure out how to drive the value proposition here, it could emerge victorious when the dust settles.
Who are you putting your bets on? Let us know in the comments.
Contact the author: patrick.george@insideevs.com
