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.
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
Would I buy an American-built, Chinese-branded car to replace my England-built, Japanese-branded car? Yeah, proabably, if it had the features I want. Give me a hatchback (or a wagon) with a manual transmission and I would buy it even if was built on Venus by Martians.
> Would you buy an American-built, Chinese-branded car?
Not until the parent company has a history of reliability. American manufacturing can be great (e.g. Honda) when the parent company is running the show, or garbage if the parent company is American or European, by and large. I have no idea what QC processes and post-sale support Chinese automakers put in place. They also don’t have experience selling expensive durable goods directly to north American consumers, who have expectations shaped by culture and over 100 years of a car marketplace that are different from China.
Then there’s the telemetry BS. I won’t buy a connected car made anywhere, and a Chinese car wouldn’t be an exception. In fact I would almost rather my data be sent to China, where they can’t do much to me individually, than sold to Lexis Nexis and other brokers for use by advertisers and insurance companies to extract money from me.
“We have to compete with China!”
Well, what China did was invite foreign companies to build factories domestically, then learn from that tech and invest a lot of public money in new companies and universities to utilize and extend that knowledge.
Well, anything but that!
It has the same vibe as ‘I would do anything to get in shape, except diet, exercise, or medical intervention.’
Would you buy an American-built, Chinese-branded car?
Sure. If they’re any good to drive.
It’s hard to get objective reviews from sources I trust, but it seems like Chinese manufacturers don’t prioritize driving dynamics and handling the way I would like. The rest of the tech seems top notch, but I need an engaging experience on top of that.
If it was a small car like my Fit, yes. Especially if it was a hybrid. No one caters to my tastes in new cars.
Can I interest you in the newest F450 dually though? Maybe a TRX?
How about a 3 row SUV or bland crossover?
I would not be surprised due to the fact the US policy of allowing unions to screw over the American population and get Rich by doing less and doing it so poorly. They union workers need to be brought into the real world and start earning what they are being paid or be replaced with more effective harder working employees or robots. I mean Ford is the most unionized auto manufacturer yet can’t build anything with out the record on recalls.
And it is their fault not Trumps
But the unions protect the workers from the greedy corporations.
How exactly do unions screw over the US population? Why are you so intent on America, with it’s almost non-existent middle class, having workers get squeezed even further? Why do you give the decision makers at these companies a free pass? Why am I wasting my time asking a MAGA, who STILL thinks Trump is some guy worth defending as being competent at anything?
You actually think union employees are “getting rich” and doing substandard work? Union member and Fuck You.
Almost non-existent middle class? I thought its about 50%
Anecdotally, most “blue-collar” union members I know (Midwest resident) are hardcore right-wingers, and very openly pro-trump. That includes a fair number of former and current UAW workers, FWIW – despite the UAW generally leaning towards Democratic politicians (even through their transformation through the political spectrum) and movements over the decades.
The UAW is one of if not the most well-known, publicized, and scrutinized unions in North America, and perhaps the modern world. They have not done a very good job giving, keeping, or pushing for unions in general to have a good reputation especially among outsiders, and have given what generally started as good and wholesome employee-founded and -operated organized labor groups a “bad name” in many circles.
Most rational adults recognize that the UAW doesn’t represent all unions, nor their culture. They can also recognize that some industries generally require union membership, especially in industries with higher risks of danger and injury and such.
By the same token, most rational adults can also understand why workers in some industries might have reservations about buying into a system with their entire livelihoods that got as openly corrupted and detrimental to widespread society as the UAW (and others) has. It’s also reasonable to be concerned about the strong-arm scare tactics and what can be an alarmingly monochromatic worldview some of the more-hardcore union proponents can and do take, especially when efforts like “Right to Work” and similar get so widely and expensively campaigned against.
There are some good and even great unions. There are also many non-union companies that do well to take care of their employees without coercion or force, and do not “require” a union, and whose culture could be worsened by a unionized presence. Yes, one can make the argument that those companies and employees are standing on the shoulders of the past unions with the benefits and rights they have, but that’s not universally accurate, especially for companies that have long existed with high employee satisfaction and no union activity in the same immediate realm, notably employee-owned institutions.
Union bashing is almost complete. You conservatives have almost entirely killed the middle class. Better get those last greedy, lazy union members and then America will be great again.
I find it fascinating that this ridiculous talking point still gets parroted around. I wasn’t aware that the UAW designed, engineered, developed software for and sourced the parts for these cars that keep getting recalled. They put the cars together per requirements which I would say is least amount of influence into quality. I doubt logic makes into that echo chamber though. They aren’t getting rich either.
Facts don’t lie, why are Chinese cars cheap and more dependable? And are you supporting living wage buy saying it but buying or wanting to buy cheap Chinese stuff?
Essentially slave labor. That’s how. Top to bottom. I’m also not sold on quality either.
The union is actually not the problem here. What matters is the product itself.
In fact, they are totally capable of making good cars. They made cool cars including the Vibe GT and Prizm GSi, their base model counterparts which run a long time with no problems and low running costs, as well as the legendary Hilux (from 90-95).
While the UAW gives unions a bad name, and even other unions don’t like them, they can make Toyotas just fine 🙂
Hi. I’m in a union. I work hard for my pay and my union helps protect that pay by allowing my colleagues and I to collectively bargain with our employer. We’re stronger for it and so is our employer.
I’m guessing that union isn’t the UAW, though, which gives unions bad names, or at least has for the last few decades.
No, I’m not in the UAW. The original commenter did not mention the UAW by name but rather, “unions” and “union workers” while implying we are a bunch of lazy assholes who should be replaced by robots or something. It’s a stupid comment.
“some people want CHEAP Chinese cars here”
FIFY
“Would you buy an American-built, Chinese-branded car?”
If it’s anything like my 20 yo American-built, Japanese-branded car the answer is oh HELLS YEAH!!
My wife drives a Buick Envision which is made in China. You can’t tell the players without a scorecard anymore. Just make a good car. If the Chinese give Jelly Mold an award he’ll do whatever they want and make it sound like his own bigly idea.
I have an American built German branded car and a Mexican built American branded car. (Also an Italian built Italian car, but it’s 46 years old.) Auto parts are sourced world wide and put together somewhere. (Duh, Captain Obvious.) Brand doesn’t matter to me; it needs to be a quality product that fills a need. Made in America is nice because it creates good paying jobs.
If it’s made in America it also has reduced carbon emissions from not shipping a car across the ocean.
Good point. I hadn’t thought about that.
Does it really though? How did the materials to build it get here?
Since parts are already shipped around the world we could assume that it makes no difference where the car is assembled and the only savings comes from final shipping.
In reality alot of parts comes from north American production. For example the Ford Ranger is ~80%NA parts so there is savings to making it here, and it is proof that pretty much anything could be made here to lower carbon emissions.