The President Won’t Stop Talking About Tiny Japanese Kei Cars

I usually do the Wordle first thing in the morning, and for fun I take my performance as a sort of sign of how in sync with the universe I am. If I can grab a 2/6 I’m in the zone, but anything worse than a 4/6 portends disharmony. This morning I broke a long streak with the dreaded x/6.

This is all to say that, after looking at today’s big news, I conferred with most of the staff to discuss how I’d approach today’s Morning Dump. The news is dominated by reactions to the President’s policy agenda, and that policy agenda has a huge impact on the automotive market.

Much of it revolves around two fixations: Very small Japanese cars and a very large European island. What happens next is of no small importance to humanity in general, and I’m somewhat grateful this morning that my remit is to put it primarily in the context of cars and not, say, the Treaty of Westphalia.

Being out of sync, I’m going to take this carefully and slowly, starting with the revelation that President Trump still wants automakers to build Kei cars, then talking about how this whole Greenland business could have major effects on European automakers, before talking about how it’s going to benefit companies building cars in China.

And, since I’m already talking about how strange the world has become, I might as well toss in the fact that Renault is going to start making drones.

The President Again Asked Ford CEO Point Blank If He Could ‘Sell Kei Cars Here In The U.S.’

The President surprised everyone, including the assembled representatives of America’s 2.5 major automakers, by announcing that he’d made it legal to build Kei cars here in the United States. He seemed to be talking very specifically about the small Japanese cars that were designed to be cheap, qualify for lower insurance, and could be owned without needing to prove you have a parking spot.

Looking at his statements, the best anyone can gather is that President Trump saw these on his swing through Asia and, facing a huge affordability crisis, wants a VW Beetle-like people’s car that normal people could buy for a small amount of money.

So far as I can tell, it isn’t suddenly easier or more practical to build Kei cars, and no automaker has gone on the record saying that they’re going to do it. The specific regulation changes he or Transportation Secretary Sean Duffy is working on haven’t been announced, and, arguably, it is legal to currently build something like them here.`

While I sort of took the Kei Car thing as a one-off thing said in passing, it’s apparently not, as CEO Jim Farley recently mentioned. This comes via the Detroit Free Press, and it’s a thinker:

He brought it up to Ford’s top executives during his Jan. 13 factory tour at Rouge Center — where Ford makes its full-sized F-150 pickup.

“The president today asked me, ‘Can you sell kei cars here in the U.S.?’ ” Farley told the media on the sidelines of the Detroit Auto Show the evening of Jan. 13. “I think that’s exciting. That’s fun to talk about the possibilities.”

A reporter quickly followed up, asking Farley how he replied to Trump’s question.

Farley paused and then said: “I worked at the Scion brand and brought that into the country and I loved that little car. But we’ll continue to look at the market. Affordability is a priority for us. But frankly a small minivan for six people in the U.S., I’m not sure that will be a high ticket.”

There’s a lot to unpack here, because when enthusiasts hear “Kei” car, we imagine a Daihatsu Copen or a Honda Acty truck. What Farley is alluding to is something like a microvan, more in the mold of a Suzuki Every Plus. Technically, most of these 6- or 7-passenger tiny vans are not really Kei, but that’s a difference most people don’t recognize, as many of these are extended versions of Kei platforms.

Ford, actually, made one of these! The company’s Taiwan JV sold a version of the Suzuki Carry ST80 rebadged as the Ford Pronto for a few years (see the image at the top of this post). Based on what Farley said, that’s what President Trump is imagining.

I don’t know that there’s a market here for that, nor do I know that an American car company could find enough margin to build one of those here, but I kind of love the idea. This is not a conversation I’d ever imagine we’d be having as a car community. I’m highly skeptical this will come to be, though I’m tickled by the idea because I think it would be cool.

I also think Slate should just shift to building something like a six-passenger version of its platform.

The EU And US Trade Deal May Be Kaput

Speaking of Taiwan, that’s usually the island of massive geopolitical importance in the news because its geographically proximate neighbor seems to desperately want it even while the rest of the world and a majority of its own inhabitants are like “nooooooo, stop that.”

Now, it’s Greenland. Whether you believe the country is of such ginormous strategic importance that it’s worth buying or invading, or you think this is because President Trump is upset that he didn’t get a Nobel Peace Prize, is important, but the actual reasoning isn’t as relevant if you’re a European carmaker as the huge disruption it’s going to cause.

If you’re a European carmaker, you’re saying “noooooo, stop that” to anyone who will listen. The EU and the United States tentatively have a new trade deal, and that trade deal would allow various brands to sell European-built cars on this side of the Atlantic with only a 15% import duty.

The President is now threatening to throw all of that out the window, according to Bloomberg:

Over the weekend, Trump blindsided a number of European countries, including Germany and France, with a plan to slap additional duties of 10% on imports from February, rising to 25% in June. German manufacturers rely on the US as a major source of sales and profits, and import models such as Mercedes’ S-Class to the country.

The carmakers are already under pressure from Trump’s tariffs, currently set at 15% for most vehicles and parts imported from the European Union. The US president roiled auto markets last year with extra duties that rose from around 2.5%, triggering profit warnings across the sector.

It’s pretty obvious why this would harm automakers building cars in Europe and selling them in the U.S., but this gets worse if you consider that European automakers could also impose duties on American-built cars going to Europe, which are mostly European luxury SUVs and crossovers from Mercedes, BMW, and Volvo.

The European Parliament is reportedly stopping work on the trade deal, and some European leaders are instead threatening to use something called the “trade bazooka” on the United States.

Here’s CNBC‘s explanation of that:

Regional diplomats held an emergency meeting in Brussels on Sunday afternoon to discuss their response to Trump’s threat to escalate tariffs, with France reportedly pushing for the EU to use its strongest economic counter-threat to the U.S., known as the “Anti-Coercion Instrument” (ACI).

The much-vaunted instrument is seen as a nuclear option when it comes to economic counter-measures as it could see the EU restrict U.S. suppliers’ access to the EU market, excluding them from participation in public tenders in the bloc, as well as putting export and import restrictions on goods and services and putting potential limits on foreign direct investment in the region.

The lack of a trade deal could effectively kill an automaker like Ineos, which builds its cars in France, and a tariff on imports of American-built cars would make life for various European carmakers even worse. For now, the EU threat seems to be to re-implement suspended retaliatory measures, which impact targeted products like “bourbon, certain textile products, specific steel and aluminum products, motorbikes and boats.” Wisely, the EU kept cars out of this deal, as it would mostly harm them.

If the logic of politics is to keep your friends close and your enemies closer, then perhaps this move is designed to get even closer to other NATO nations by making them enemies?

All Of This Is Leading To A 50% Drop In The Price Of The Lotus Eletre

Just so you don’t think that only President Trump has used tariffs for political reasons, President Biden also put a 100% tariff on Chinese EVs during his term. I wrote that this specifically hurt Lotus, which planned to sell a bunch of Chinese-built EVs in the United States.

Canada has historically maintained a similar posture with regard to tariffs on Chinese-built cars, but the recent moves from the White House have led to the Canadian government allowing a growing number of imports.

While this might be good for Chinese brands, it’s maybe even better news for American and European brands that build cars in China but already have brands in Canada, as Bloomberg reports:

At the top end of the market, the agreement has been welcomed by Geely-controlled sports car brand Lotus. Its Eletre sport utility vehicle, which starts at C$313,500 ($225,600), is one of the few luxury China-made EVs to have entered the region. The brand said in a statement it expects the selling price will drop by about 50% with the new tariff rate.

Polestar, another big name in Chinese billionaire Li Shufu’s Geely empire, has been particularly hard hit by the US and Canada’s imposition of hefty tariffs. After the US raised its duties, the company pivoted its focus to the Polestar 3, which is made in its factory in South Carolina, and the Polestar 4, produced in a contract manufacturing deal with a Geely and Renault SA joint venture in South Korea.

Polestar, Lotus, Volvo, and Tesla could all be winners here, which is a strange twist.

Renault To Make Drones

It’s not uncommon in times of war for automakers to be turned into the producers of various armaments and weapons. With a war going on in Ukraine, the French government has made a deal with Renault and defense company Turgis Gaillard to build drones for that nation’s military:

Here’s the Financial Times on what’s been announced so far:

Renault said it would work with Turgis Gaillard to produce drones at two of its sites but declined to comment on the value of the contract or the number of drones to be produced.

“We were contacted for our production and creative industrial expertise. This project is ongoing and is led by the defence ministry. We confirm our participation in this project, at the request of the state,” Renault director Fabrice Cambolive told broadcaster BFM Business on Tuesday.

It’s not yet known if these will be weaponized or surveillance drones, although it looks like many of them will be built in the company’s Le Mans facility.

What I’m Listening To While Writing TMD

Peter Frampton’s “Frampton Comes Alive!” is now 50 years old. This is the whole album in YouTube form, and it’s worth sticking around for the big finale (if you ruin it, he’s going to be pissed off!).

The Big Question

What would an affordable six-passenger minivan for Americans look like?

Top photo: Suzuki, Ford, DepositPhotos.com