The Auto Industry Is Hoping The President Doesn’t Throw Them Under The Bus In China

President Trump is finally heading to China for his long-awaited series of trade talks with Chinese President Xi Jinping. The White House has made it clear that the automotive sector is mostly off the table at these talks. That doesn’t seem to be placating the automotive industry.

Today’s installment of The Morning Dump is all about what could happen, starting with how China’s vast car industry could interact with America’s car production. The concept of partnerships between the two countries on cars is sensitive, although Ford is soon to open its first plant with Chinese technology in the US very soon, so it’s possible.

The concept of tariffs was that automakers would start opening up more plants in the United States, which is slowly happening. Very slowly. So far only a handful of cars have actually switched as everyone waits to see what happens with the USMCA.

While carmakers worry about the threat of Chinese technology, one automaker in the US can’t even have employees at work due to failing infrastructure. How’s that for dichotomy?

Will The President Go Wildcard?

One of the best, most chaotic characters in all of narrative history is Charlie from It’s Always Sunny in Philadelphia. He’s a Don Quixote romantic with a Puckish charm and, likely, some of Gritty’s DNA. Charlie is also a “wildcard” as seen in the clip above. He’s willing to cut the brakes of the van he’s currently in so that he can fulfill a mission that’s usually only comprehensible to him.

It makes for great television, mostly because it creates ceaseless misfortune for everyone in his immediate universe. Whatever your politics, it’s undeniable the current President has a certain wildcard aspect to him, and carmakers seem very concerned that’s going to come into play when he’s in China this week.

Reuters has a good summation under the headline “US industry, lawmakers worried Trump will open US to Chinese autos,” that mentions President Trump is one of the few individuals with any power who seems excited about the prospect of Chinese automakers opening up plants in the US.

The White House has been explicit that cars aren’t going to be discussed, so what’s the concern?

U.S. Trade Representative Jamieson Greer said in Detroit in April that there were no plans to change the connected car rule, and that autos were not on the agenda at the Beijing summit. Commerce Secretary Howard Lutnick also has ruled out Chinese investments in the U.S. autos sector.

But Scott Paul, president of the Alliance for American Manufacturing, a domestic industries group, said there is a strong concern that Trump, who often talks of attracting more auto assembly plants to the U.S., could act alone.

“He’s left wiggle room in dealing with the auto sector,” Paul said.

Any plant approved would take two-to-three years to launch production, leaving consequences to Trump’s successor.

The US might not be have all the cards as it approaches the talks. Some in China view the US as an empire in decline, as the New York Times reports:

In January, a nationalistic Beijing think tank affiliated with Renmin University published a triumphant report about Mr. Trump’s first year back in office. The report argued that his tariffs, attacks on allies, anti-immigration policies and assaults on the American political establishment had inadvertently strengthened China while weakening the United States. Its title: “Thank Trump.”

That report comes with its own agenda, but it’s true that China has become less reliant on US exports and has used the trade war to expand elsewhere, as Nikkei Asia points out:

In the first four months of this year, the U.S. accounted for just 10% of China’s total exports, according to Chinese customs data. That is down from 18.4% in 2016, before Trump ramped up tariffs against China during his first term.

“The reality is China is no longer exporting to the U.S. directly because it has built up supply chains in other countries,” said Raymond Yeung, chief economist for greater China at ANZ. “For China, the overall U.S. trade policy against the world matters more than direct tariffs. If the U.S. imposes tariffs on Vietnam, Indonesia or India, it may indirectly impact China.”

Of course, the other side of this is that some people want Chinese cars here, and there’s been a concerted effort by Chinese brands to court American buyers. Could a president in search of a win sell out an entire sector? That’s the concern of the week.

Right now, the only Chinese-owned and automotive-adjacent factory is a small facility in California building BYD buses, although another one is almost done…

Ford’s Plant With Chinese Tech Is Ready To Open

The BlueOval Battery Park Michigan in the small town of Marshall is finally ready to start making batteries after years of drama. What was the issue? The plant, though not owned by a Chinese company, will use battery technology sourced from one. Specifically, the plant will use LFP chemistry licensed from CATL, the largest battery company in the world.

Just so you don’t think that President Trump is the only person willing to make an industrial deal with a Chinese firm, this project has its roots in the Biden Era plan to create green jobs and lessen our dependence on oil which, given that gas prices have been so low for so long, seems silly.

I’m kidding. Gas is expensive AF.

As Bloomberg explains, the whole concept of this was both necessary and designed to not freak people out:

Ford’s venture with CATL is structured to allay concerns. The US carmaker owns the plant, land and equipment and hires the workers. CATL, which holds no equity, offers lithium iron phosphate battery chemistry under a licensing agreement, and dispatches Chinese engineers to train Ford employees. It’s an arrangement with echoes of the deal that allowed Chinese social media app TikTok to remain operational in America, after ByteDance Ltd. agreed to license its prized algorithm to a new US-based entity.

Both sides have reason to like this setup. Use of CATL batteries by US automakers could help them become the industry standard, and boost market share. TikTok’s technology was seen as carrying security risks, but CATL’s CEO Robin Zeng has joked his battery cells are “dumb as bricks” — i.e. no use for espionage or any other unintended purpose.

Those batteries will be used, at least partially, to supply energy to the new $30,000 electric Ford truck. The rest are planned to be used for the company’s new energy storage business that’s been organized under the name Ford Energy.

While there are other companies with LFP patents, a Ford exec told reporters it would have taken a decade to catch up without the CATL tech.

Everyone Is Concerned About The USMCA

Once automakers have an answer on what’s going to happen with China, they can move back to the more immediate threat of what’s going to happen to the United States-Mexico-Canada Agreement (USMCA), created by President Trump in his first term, that underpins a huge amount of cross-border trade.

For all the pulling of hair and gnashing of teeth about the tariffs, most homegrown American automakers have been able to get by okay because the USMCA is still in place. It’s under review and it’s making people nervous.

It’s fairly clear at this point that President Trump would prefer every car sold in America is built in America, but so far only five models can be said to have been switched because of tariffs, and those changes are still in progress.

More so than just cars, the supply chains are also important, and all this uncertainty is hard for everyone.

Per Automotive News:

Car manufacturers plan production five to seven years in advance, making it extremely difficult or even impossible for them to move quickly, said Jennifer Safavian, CEO of Autos Drive America, which represents foreign automakers in the U.S. And automotive supply chains are extremely complex, further complicating efforts to move production, she said.

“It’s hard for them to upend whatever plans they have,” Safavian said. “That’s why more certainty is important for the auto industry.”

[…]

“There are certain supply chains that have been built up over years and years that may not make sense [to have in the U.S.], which is why we have an agreement like USMCA,” said Collin Shaw, president of MEMA Original Equipment Suppliers, which represents U.S. suppliers.

What happens with the USMCA is anyone’s guess at this point.

Stellantis Employees Have To Work At Home Due To Water Main Break

Not helping with the whole “America is an empire in decline” narrative is the fact that the North American HQ of Stellantis can’t host employees because of a massive water main break in Orion Township that’s screwing with the water supply.

Being able to work at the HQ is an ongoing issue, as the Detroit Free Press reports:

The water main break is the latest hurdle for automaker employees working from the North American home office.

Stellantis ordered white collar employees in January to return to work five days a week after years of work from home policies stemming from the coronavirus pandemic period.

But since that period began at the end of March, employees have complained about parking citations as well as mysterious illnesses stemming from the older building.

Oof.

What I’m Listening To While Writing TMD

I had a dream last night about the upcoming Member’s Only track day at Lime Rock Park. Basically, I forgot to tell catering how many people were showing up and so all of a sudden I had to beg them to make a lot of sandwiches. As we were driving around in some sort of van (VW Transporter?), Nick told me not to worry and put in a tape of Bachman-Turner Overdrive. I don’t remember the song, but let’s assume it “You Ain’t Seen Nothing Yet.”

The Big Question

Would you buy an American-built, Chinese-branded car?

Top photo: BYD