It took a century to build a global automotive supply chain that spread technology, manufacturing, and jobs across borders, delivering mobility to millions. Now, with a single stroke of the pen, President Trump’s executive order threatening 25% tariffs on goods imported from Mexico and Canada could upend that supply chain, possibly disrupting the industry central to our economy and the economy of our friendly neighbors.
Welcome back to Critical Materials, your daily roundup of news and events shaping this promising but often chaotic transition to electric vehicles.
Also on our radar today: Rivian says other automakers are knocking on its door since it announced a partnership with the Volkswagen Group to build next-generation software and electrical architectures. Plus, Tesla, BYD and several other automakers, mostly Chinese, are suing the European Union over tariffs.
30%: Trump’s 25% Tariff Will Disrupt The Automotive Supply Chain
Trump has signaled that he intends to proceed with the proposed 25% tariffs on all goods imported from Canada and Mexico starting February 1. According to Trump, the tariffs are necessary to encourage America’s neighbors to do more to curb unauthorized immigration and drug inflows. However, Border Patrol figures show that illegal crossings have been at the lowest level since June 2020.
The automotive industry could suffer a huge blow from these tariffs. The U.S. imported $87 billion worth of vehicles and $64 billion worth of parts from Mexico in 2024, as per Commerce Department data cited by CNN. If the tariffs go into effect as promised, car prices in the U.S. will go up by thousands of dollars, sales could slow down and suppliers risk going bankrupt.
The tariffs will likely compound the problems for an industry already facing significant roadblocks as it embraces EVs more. The U.S. has imposed 100% tariffs on Chinese vehicle imports and has banned Chinese vehicle software and hardware from 2027. Now, tariffs threaten to squeeze automakers’ profits even more while potentially hitting consumers across the political spectrum with soaring inflation.
Here’s more from Automotive News on the same:
Some suppliers have been caught off guard by changes automakers made to their EV production plans in recent months because of lower-than-expected sales. Suppliers that invest significant capital into new or refurbished factories to make those parts are often not getting the returns that they were expecting, leading to job cuts in some cases.
Further reducing demand because of higher costs from tariffs will only make that worse, the supplier executive said, warning that some smaller parts companies that banked on big business from a given vehicle program could go out of business.
“The industrial base has a ton of capital deployed to produce those vehicles, and more likely than not demand for those vehicles is going to slow down even more than it was,” the executive said. “And then tariffs will impact the financial ability of companies to deal with the slowdown in demand. A lot of suppliers could go belly-up.”
An estimate by Wolfe Research, cited by the outlet, states that the average car price in the U.S. could increase by $3,000 if the tariffs go into effect. EVs could take a bigger hit if the tariffs are combined with repealing the federal tax credit of up to $7,500.
Some entities stand to benefit from the tariffs, like U.S.-based suppliers who might see an uptick in their business as automakers look for local partners to avoid the tariffs. But the net effect is going to be negative. Some of the best-selling EVs of 2024, like the Honda Prologue, Ford Mustang Mach-E and the Chevy Equinox EV, are made in Mexico.
Dozens of gas-powered cars are also made in Canada and Mexico. Certain trims of the Honda Civic and CR-V have Canada as their final assembly point. The BMW 2 Series Coupe and 3 Series sedan, Chevy Blazer (gas and EV), Ford Maverick and Bronco Sport and dozens of other fossil fuel-powered cars are made in Mexico.
Trump is also pushing to end consumer incentives for EVs—a move that would require congressional approval and is already facing strong industry pushback. Regardless, one thing is clear: Uncertainty could define the months and years ahead and if Trump’s threats materialize, the auto industry could be in for a rough ride.
60%: Automakers Are Reportedly Interested In Rivian’s Tech
Photo by: InsideEVs
Rivian’s slow metamorphosis from an inexperienced startup to a force in software-defined vehicles is gaining increasing attention. The automaker still has to turn a profit on its EVs, but its future looks promising with huge cash infusions from the Volkswagen Group and the U.S. Department of Energy.
Now, automakers other than Volkswagen are also interested in Rivian’s tech, according to a senior Rivian executive. “I’d say that many other OEMs are knocking on our door,” Wassym Bensaid, Rivian’s chief software officer, said in an interview, Reuters reported.
He stopped short of sharing which other brands were at Rivian’s doorstep. But it’s possible that they’re also looking for a software collaboration with the start-up. Rivian and the Volkswagen Group last year announced a $5 billion joint venture to build next-generation vehicle tech.
The deal gives Rivian the capital it needs to sustain its business whereas Volkswagen will benefit from Rivian’s expertise in software and electrical architectures. Rivian’s new zonal architecture in the second-generation R1S and R1T reduces the number of ECUs from 17 to 7.
Here’s an explainer on why that’s important and how it helps make the vehicle better and more efficient. Tesla is spearheading the industry’s charging transformation by opening its Supercharger network to EVs that aren’t Teslas. Could Rivian lead the industry’s software transformation?
90%: Tesla, Chinese Carmakers, Sue The EU Over Tariffs
Photo by: Tesla
The battle over tariffs is getting out of hand. Chinese automakers BYD, SAIC and Geely are challenging the European Union’s tariffs in court, Reuters reported on Friday. Tesla will join them, too.
After an anti-subsidy investigation last year, the EU imposed 17% import tariffs on BYD, 18.8% on Geely and 35.3% on China’s state-owned SAIC Motor. Tesla ended up with the lowest duty of just 8%, but it is joining the Chinese automakers in challenging the EU anyway, according to Politico.
The lawsuit has been filed with the Court of Justice of the European Union in Luxembourg. An EU representative stated that the bloc will not back down, vowing to fight back after last year’s anti-subsidy investigation concluded that the Chinese government unlawfully and heavily subsidized its EV industry.
100%: What Happens With The Tariff Threats?
BrightDrop Zevo 600 production at at CAMI Assembly manufacturing facility in Ontario, Canada
So far, Trump hasn’t proposed any special clauses or exemptions in his tariff plans, which could change the equation. However, if blanket tariffs on Canada and Mexico go into effect, the impact could be widespread. Whether you’re an automotive worker or a consumer planning to buy your next car, disruptive changes might be on the horizon, at least in the short term.
What happens next here? Does Trump back down, or are we looking at much higher prices? Share your thoughts in the comments.
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