How Car Enthusiasts Around The World Could Win In Trade Talks

The Toyota Corolla you buy in America is mostly identical to the Toyota Corolla you buy in Canada, because safety regulations between the two countries are, like the music of Crosby, Stills & Nash, closely harmonized. The Toyota Corolla you buy in Japan is a little less harmonized, because the rules around safety are a little different. The same for any Corolla purchased in Europe.

Does this make sense? I think what was once a practical concern no longer really works for the modern world, and if we’re tearing up trade norms, we should tear up safety norms as well. I’m not alone in thinking this! One of Japan’s leaders just suggested this is a way to get around some pesky trade issues.

The Morning Dump has been dominated by trade issues lately, and I thought it would be nice to take a slightly more positive spin on what could happen. There are risks, sure, but opportunities as well. This includes more vehicles built in the United States and, perhaps, more access to rare earth minerals from places outside of China.

Tesla is having a weird one today, and a new report shows that the company’s plan to buy back its own leased cars for “robotaxis” isn’t what happened. Instead, the company seems to have just upgraded the software on vehicles and resold them for more money.

Japan Could Give The U.S. A Break On Standards, Which Should Be A Model For Everyone

The entire concept of a 25-year import ban comes from a quirk of car production that made dealers in the United States quite mad. You see, back in the ’80s, non-dealer importers shipped in and then sold better versions of mostly European cars like the Mercedes 500 SEL or BMW 745i Turbo.

This became significant enough that automakers and dealers lobbied Congress to change the law to make cars that don’t fit within U.S. standards illegal to import. At the time, people called it the “Mercedes Law” because of specific concern from Mercedes dealers, but they were far from alone in worry about losing customers.

Why didn’t the United States get these better versions of some cars? Depending on the car, it could be a mixture of emissions regulations and differing safety standards. Automakers, to some degree, have to localize their cars for different places, and it wasn’t worth it, for instance, to certify a manual version of a Mercedes sedan for a market like the United States, where the manual take-rate was so low.

Were these cars any less safe or more polluting than their American counterparts? Maybe, maybe not. Europe and the United States have slightly different goals with regard to emissions regulations, with the former focusing on greenhouse gases and the latter being more interested in local particulates. Still, with some differences, European or Japanese cars are every bit as safe and clean as American ones, and vice versa.

The United Nations, for 50 years, has attempted to make standards more interchangeable with the World Forum for Harmonization of Vehicle Regulations. What’s usually the hold-up? Lighting! This is something we’ve written about extensively, but one of the biggest issues between countries is the way a car’s lights look and operate. Some of this is the amber turn signal. A lot of it has to do with how a headlight beam should be shaped/aimed.

In the United States, we want our beams to be long and wide to cover large distances because we live in a big country with big roads. European and Japanese standards tend to be biased towards illuminating the side of the road, which is important for narrower streets like you find in those places.

These are not huge differences. Still, a mix of various crash/lightning/emissions standards is enough to make carmakers decide not to import certain variations of vehicles in all directions. For instance, Japan doesn’t have an automotive tariff on imports, but these standards may be keeping some cars out of the country (also, most Japanese commuters wouldn’t get much use out of a Raptor).

A piece out in Bloomberg this morning suggests that, at least in Japan, some of this could be adjusted:

Yuichiro Tamaki, head of the Democratic Party for the People, said in an interview Thursday that Japan could offer to reinvest proceeds from maturing US Treasury holdings into super-long bonds in return for concessions on tariffs.

[…]

Tamaki also said easing safety restrictions on imports of cars produced in the US by Japanese automakers could be a bargaining chip that would increase jobs in the US and close the US-Japan trade deficit, while minimizing the impact of the tariffs on Japanese car companies.

“Japanese cars that are made in America, by Americans, and are produced with the employment of Americans — I think it would be good to be able to count such cars as an expansion of exports from America,” he said.

The difference in safety restrictions in the US and Japan, such as the color of brake lamps, is a snag for re-imported cars that could be revised on the Japanese side, he added. He said that a large Japanese automaker was on board with the idea but declined to give further details.

The bit about brake lights is, I think, a mistake (they probably mean turn indicators). Either way, the idea here seems to be that Japan could import American cars (like the RAV4) that are substantially similar and then maybe just swap some lights out and be done.

This would shield Japanese companies from some tariff impacts and help balance out trade a little bit, in theory, and America would be able to roll over its debt.

Why don’t we do this with Europe and Japan in both directions? It shouldn’t piss of the dealers because the dealers can be chosen as the only distribution point for these vehicles. It’s good for the car companies because it helps lower costs. Perhaps a certain number of vehicles every year can be imported/exported and accepted as similar enough?

If someone in Japan wants a PRO4X Frontier, and someone in the United States wants the faster version of the outgoing Supra, why can’t they have that? If we’re rewriting the rulebook, let’s make some better rules!

[Ed Note: It’s worth noting that many American cars are designed for IIHS’s ridiculously tough Small Overlap Rigid Barrier crash test (this is not a federal test, though it’s important to consumers/insurance companies in the U.S.), and European cars have to go through pedestrian protection testing not required stateside. That said, many automakers already try to meet all safety requirements in order to sell in a variety of markets. Do I think it’s best thing for enthusiasts to have regulations that have to work for disparate markets versus ones catered to certain driving environments? Maybe not, but it’s a complex issue worth discussing. I’d like to see how more smart harmonization could ease some of the red tape restricting vehicle trade. -DT]. 

Mercedes Will Build The GLC In Alabama

Sensing tariff issues will continue to be present in the future, Mercedes is planning to eventually shift production of its Mercedes GLC to its Tuscaloosa, Alabama plant, according to AL.com.

Speculation about adding another vehicle began once Mercedes started talking about measures to deal with the Trump Administration’s automotive tariffs.

The Wall Street Journal had reported that Mercedes could relocate the GLC to the U.S., which is currently made in Bremen, Germany.

The company already makes the GLE, GLS, GLE Coupe, Maybach GLS, EQE, and EQS in the plant. While the GLE is usually the biggest seller in the United States, the GLC isn’t far behind. Just two years! Actually, that’s kinda far.

People Still Care About Rare Earth Elements

Electric cars are here to stay, and while the trajectory may not be what some hoped, this does mean that more rare earth elements will likely be needed.

Perhaps that’s why President Trump was on hand for the signing of a deal by U.S. rare earths company MP Materials and Saudi mining company Maaden. What’s the deal actually say? Like a lot of these commitments, there’s a lot more promise than actual promises. Here’s Nikkei Asia’s take:

In a joint release, the two companies said they “aim to explore opportunities to jointly develop a vertically integrated rare-earth supply chain in Saudi Arabia,” including mining, separation, refining and magnet production.

Rare earths are 17 elements used in an array of modern technology, including powerful magnets needed for EVs, wind turbines and defense systems such as the actuators on missiles and small motors that power drones. MP operates Mountain Pass, the only rare earths mine in the U.S., and aims to build a mine-to-magnet supply chain in America.

MP chief executive James Litinsky said the memorandum of understanding signed by the two was “an important first step towards rebalancing the global supply chain in a moment of transformational growth fueled by emerging technologies.”

Relying on Saudis for energy has never gone wrong for the United States… I kid, but relying on China for everything is also extremely problematic.

As the same report notes, while this deal was being done, the company Shenghe Resources, which is an investor in MP Materials, said it was going to be buying the Australian rare earths company Peak Rare Earths. It’s like the Wild West out there!

Tesla’s Lease Buyout Ban Apparently Had Nothing To Do With Robotaxis: Reuters

Today there’s a report from Reuters showing that Tesla CEO Elon Musk’s claim that it wasn’t allowing people to buy out their leases because it needed the vehicles for robotaxis wasn’t true. Instead it looks like Tesla decided to sell off-lease cars, in some cases after flashing in some software upgrades. From Reuters:

“You don’t have the option of buying,” Chief Executive Elon Musk said at an investor gathering in California in April 2019. “We want them back.”

“Next year, for sure,” he added, “we’ll have over 1 million robotaxis on the road.”

None of that would prove true. Despite repeated promises, the robotaxis never came. Tesla instead found an unusually lucrative way to make money by flipping many of the off-lease cars to new buyers, according to four people familiar with Tesla’s retail operations.

Rather than storing the used cars – a fast-depreciating asset – Tesla started adding features to them through software upgrades. It then sold the vehicles to new customers who would pay thousands more than lease-end buyers would have, the people said.

That’s clever, though, right? Especially during the pandemic. Lease a car, force someone to give it back to you, make software updates that cost you almost nothing to install, and resell the car at a high price. Customers knew what they were getting into when they leased the car, right? The bit about convincing people you’d be selling robotaxis, which juices the stock price, is equally as clever if you can get away with it, if not a little shadier.

Tesla has changed its lease policies, and it probably has nothing to do with robotaxis. Instead, used Tesla values are now down a bunch (partially because of a price war it helped start). The company doesn’t want to be stuck with these cars; therefore, allowing customers to buy out leases makes more sense.

What I’m Listening To While Writing TMD

This is great (greatest?) American Dolly Parton doing a cover of “Shine” by Collective Soul. I just learned this was a thing and had to share.

The Big Question

I know it’s highly unrealistic that we’ll be able to get globally harmonized trade standards, but if we did, what’s the car you’d want?

Top photo: Toyota