When politics and cars clash, it’s usually the car enthusiasts who lose. This was never clearer than in the ’70s, when the 1-2 punch of smog-filled skies and a massive oil embargo combined to create an era of emissions-choked cars. Desiring more power, Americans looked to gray market European imports, only to have politics arrive yet again, leading to the 25-year import ban. Will this trend reverse in the future?
While it’s likely that the UK and EU will slow-roll some of their emissions regulations, they’re not going to go backwards. For all the talk of EV mandates and cancelling the California Waiver, it’s not as if Congress planned to eliminate the fines automakers have to pay for not reaching Corporate Fuel Economy Standards. Oh, wait, that’s what Congress is quietly trying to do.
With the softer standards for gas-powered cars potentially in the offing, will we be in an inverted situation where the American cars are the more enthusiast-focused ones? It’s definitely possible.
This is me trying to put a positive spin on the news for The Morning Dump. I want The Autopian to be a generally good vibes situation, where people come to us to get away from the rest of it. At the same time, I don’t want us to constantly be putting our heads in the sand, partially because I think people ignore politics at their own peril, and that’s doubly true for car enthusiasts. So there’s the somewhat positive spin.
Ok, here’s the part that’s less fun. Panic! Automakers are panicking over magnets. I don’t blame them. As if this trade war wasn’t already a pain in the tuckus for many, it’s also maybe going to cause Detroit Axle to go out of business as the negative outcomes might hit the same rust-belt voters who helped swing the White House.
Also, the price increases are here, it’s just not obvious yet.
Senate Tries To Remove Teeth From CAFE Regulations
I saw a comment on Reddit this weekend that timed well with my own thoughts. Here’s the headline of the post: “With Tightening Euro Emissions Will US Spec Cars Be The Ones to Have?” It’s an interesting thought exercise. For the reasons mentioned above, “grey market” imports became extremely popular in the 1980s as Europeans got the bigger-motor, less-restricted, more powerful versions of a lot of luxury cars.
Eventually, Congress slapped that down with the 25-year import ban, which is sometimes referred to as the “Mercedes Law,” as Mercedes dealers in particular felt harmed by the grey market. Is the inverse going to happen now? For the last few years, it’s been the United States that’s often had the more powerful/better specs of cars.
If you’re a Lexus enthusiast, a Final Edition RC F is probably the one to get, but those haven’t been for sale in Europe for a while. Every time I’m on that side of the pond, I’m impressed by how many Mustangs there are, but the highest-powered Dark Horse isn’t available.
This is likely to only get more pronounced under a Washington controlled by Republicans. For example?
This weekend, the Senate Select Committee on Commerce, Science, and Transportation released the text for its revised reconciliation budget bill, and this was tucked in there:
20 (a) IN GENERAL.—Section 32912 of title 49, United
21 States Code, is amended—
22 (1) in subsection (b), in the matter preceding
23 paragraph (1), by striking ‘‘$5’’ and inserting
24 ‘‘$0.00’’; and
24
KAT25448 FT5 S.L.C.
1 (2) in subsection (c)(1)(B), by striking ‘‘$10’’
2 and inserting ‘‘$0.00’’.
That’s tricky! Rather than have a debate over whether or not it’s wise to lower Corporate Average Fuel Economy standards, Republicans in the Senate are trying to get around that by making the penalties for violating them $0, effectively ending them. This is like saying it’s illegal to urinate in public and then saying the fine for urinating in public is $0. Guess what? I’m peeing off the L Train platform.
If this passes, it would mean car companies would be way freer to sell whatever engines they want in whatever quantity and not worry about having to pass on a “gas guzzler” tax to enthusiasts. If you’re a fan of big motors, this is good news. Even if you just like smaller cars, this might save vehicles like the Golf R, which are not easily offset by companies that can’t sell EVs and haven’t sold hybrids.
Assuming everyone else keeps their fuel economy/emissions regulations, then the United States could become a playground for more high-horsepower cars.
That’s one perspective. Here’s another one, from Consumer Reports policy analyst Chris Harto:
“These proposed changes effectively gut the popular CAFE program, turning it into nothing more than an accounting requirement with no teeth. Without an enforcement mechanism, many automakers are likely to continue to leave proven, popular, and cost effective technologies sitting and gathering dust on the shelf, rather than deploying them to save consumers money at the pump. Hybrid technology, for example, is popular with consumers and delivers a great return on investment, yet many automakers do not offer consumers a single conventional hybrid option. Without enforceable standards to drive progress, we are concerned that most automakers will slow or freeze progress on delivering more fuel efficient vehicles for consumers despite consumer expectations for continued improvements in vehicle efficiency.“
Not all decisions made for enthusiasts are good for everyone, and part of having a society is balancing all of those requirements out. I love cars with pop-up headlights, but they’re terrible for pedestrian crash survivability, so it’s a net good thing that they don’t exist anymore (and it’s doubtful with new headlight tech that they’d have lasted much longer than they did).
Here’s a fun graphic from the EPA:
You can see the Malaise Era hit, with fuel economy going up at the price of horsepower. Emissions-choked cars from that era often suck and it took a while for automakers to commercialize the kind of technology (higher compression, variable valve timing, turbocharged engines and hybrids) that allowed us to have our cake and eat it, too. Now, cars are way more powerful, way safer, and way more efficient. The transition period was rough, but the results are there.
There’s no guarantee that this will make it into law, and, given that Congress needs more ways to make money to offset the huge deficit likely to be caused by the bill’s passage, I’m not sure of the logic here. Perhaps it’s to help car companies hurt by tariffs.
Either way, I’m not convinced this is going to be a huge deal. The number of people who want hi-po cars is way smaller than the number of people who want efficient and affordable ones. There is definitely a market for certain cars (see the Golf R), but the future is hybrid, and you’re going to have a hard time selling a V8-powered Blazer when someone can get a Highlander that’s just as powerful, more efficient, and cheaper to own.
Also, with the exception of large trucks, most cars are made for global markets, which means it’ll become increasingly inefficient to build one type of engine for the United States and totally different engines for everyone else. We can maybe get away with a slightly higher tune if this passes, but it’s not like V10 BMWs are coming back. I’m not even sure the V6 is going to come back.
‘The Whole Car Industry Is In Full Panic’ Over Magnets
I love the idea of “Full” panic here, compared to just partial panic. As someone who is naturally anxiety-prone, I can relate. A little panic every now and then is why my ancestors didn’t get eaten by lions, but full panic is bad. It’s bad!
According to this Reuters report, there’s panic out there over Chinese exports of magnets:
Frank Eckard, CEO of a German magnet maker, has been fielding a flood of calls in recent weeks. Exasperated automakers and parts suppliers have been desperate to find alternative sources of magnets, which are in short supply due to Chinese export curbs.
Some told Eckard their factories could be idled by mid-July without backup magnet supplies. “The whole car industry is in full panic,” said Eckard, CEO of Magnosphere, based in Troisdorf, Germany. “They are willing to pay any price.”
Car executives have once again been driven into their war rooms, concerned that China’s tight export controls on rare-earth magnets — crucially needed to make cars — could cripple production.
Another upstream panic over parts is exactly what the automotive industry needs as an excuse to yet again raise prices. If there’s any good news here, it’s that China is giving a break to American automakers, even as cars like the Ford Explorer have seen production disruptions.
Detroit Axle Says It Could Go Out Of Business Within Weeks
Michigan-based Detroit Axle is a mostly online parts company that, not shockingly, imports a lot of the cheap parts it sells to enthusiasts from China. Under the “de minimis” exemption, many sub-$800 products aren’t taxed on import, which is how Temu and Shein have continued to operate.
[Ed Note: Cheap suspension parts — tie rod ends, wheel bearings, etc. are key in allowing enthusiasts from all economic classes to enjoy their vehicles. I use almost exclusively Detroit Axle replacement suspension parts, and they’re dirt cheap and good! I’ll miss if they go; so will my wallet. -DT].
The Trump Administration is trying to end this exemption, so Detroit Axle is suing, saying it’ll put its operations out of business, per The Detroit News:
“Detroit Axle’s situation is dire; it will likely be forced to shutter most or all of its business and lay off hundreds of employees if it does not receive relief by the end of June,” attorneys for the company wrote. “And every day that passes without relief brings new irreparable harm to the company in the form of lost business opportunities, customer goodwill, and reputation.”
Detroit Axle says it employs about 230 people in Michigan alone, which is part of a trend of short-term impacts for Rust Belt voters, as pointed out in this Bloomberg story:
In Illinois, Trump’s tariffs prompted a compressor maker to delay a key equipment purchase after an ambitious factory revamp. Rockwell Automation Inc., a Wisconsin-based producer of factory tools, says some manufacturers are putting projects on hold because of uncertainty over costs and future demand. Snap-on Inc. is seeing similar hesitancy among car mechanics.
The warnings underscore the rising worry that turbulence from Trump’s trade wars will smother the progress US manufacturers have already made revving up American factories. Manufacturing payrolls fell by 8,000 last month, the most this year, according to the Bureau of Labor Statistics. US and Chinese negotiators will resume trade talks Monday in London, as the world’s two largest economies look to resolve disputes over tariffs and technology.
I hope you’re starting to see how this is all related. Being over-reliant on one source for key components of everything is bad. We should have alternative sources that aren’t just China. One way to do that is the CHIPS Act/IRA approach of providing money and support to industry and research institutions. The other way is to make everything way, way more expensive. Whichever policy you prefer (or maybe you prefer both), it’s tough for planners that we’ve gone full speed in one direction and now are going full speed the other way.
The Stealth Price Increases Are Already Here
While there are some automakers (Ford and Stellantis in particular) looking to pick up market share these days, most are finding ways to make cars more expensive to cope with tariffs without raising a lot of ire with the Trump Administration. How? If you can’t increase the price, just reduce the incentives, as Bloomberg reports:
The average sale price for a new car jumped 2.5% in April, the steepest monthly increase in five years, according to the Kelley Blue Book car buying guide. The average reached $48,699, almost a record. Incentives, which once knocked 10% off the price, fell to 6.7%. Zero-percent financing deals — a key come-on in this age of high interest rates — dropped in April to their lowest rate since 2019, according to researcher Cox Automotive. And at some point, car buyers may balk.
“On the consumer side, they’re seeing several thousand dollars of actual-experience price increase, whereas the factory is saying, ‘No man, we didn’t raise prices at all,’” said Morris Smith III, a Ford dealer in Kansas. “Stealth is a good word for it.”
The best time to buy a car is six months ago; the second-best time to buy a new car is right now.
What I’m Listening To While Writing TMD
Aerosmith’s “Crazy” came on the radio this morning, and I was going to switch the channel, but then I remembered that this song is awesome. It’s terrible, too, right? It’s wonderfully terrible, or terribly wonderful, or whatever. I enjoy the hell out of it, and this video includes both Alicia Silverstone and a Fox Body Mustang, so I’m going to go with the former.
The Big Question
If you didn’t (or don’t) live in America, what would you import? What’s America’s greatest grey market export?
Top photo: Bring-A-Trailer/Lexus
I love that video…Aerosmith is one of my favorite bands and Alicia Silverstone is hot as hell. I remember when that video came out. I used to listen to the Get A Grip album over and over and over.
Eat the Rich!
Stupid question. I have my sights on importing a Toyota Century. I’m slowly working my wife down on signing off on the purchase, though it’s a months long process.
Will I have to deal with tariffs on one even though it’s used?
A gen 4 ram Cummins if could be reasonably used and fit in most places otherwise mustang is always a classic.
The rare earth magnet thing is fairly funny if you follow it. The Chinese brought the prices down by a about factor of 100. Trying to compete with them is just insanity.
What a strange lead-in photo and headline…
Europeans have been desiring and importing American cars for decades.
You can watch any movie from the 50’s and 60’s set in Europe and see American cars.
Oh – but you actually meant “American-Market Imports”! That’s a different animal altogether.
But it certainly would not include a US Market 560SEC – Which was detuned to 237hp in America, but was @300hp in Europe. Or is that a 188hp 500SEC, which was 228 hp in Europe?
Perhaps a photo of a W207 E550 Coupe or Cabriolet would have made more sense – since you couldn’t get those in Europe at all – as the E350 or E400 was the most powerful version you could get in European markets.
I want to see Oprah address Congress.
“Hi old guys! Everybody look under your seats. You get a SUV and you get a SUV and you get a SUV. Everybody gets a SUV!”
America leads the world in toilet paper technology. When I lived abroad and I had visitors ask me what I wanted them to bring, “As much Charmin as you can fit in you luggage!” was my usual request.
Strangely, I’m in the US buying toilet paper from an Australian company (I think it’s made in North America, though–company is Who Gives a Crap?)
Listen, you don’t get an innovation like Taco Bell without similarity advancing your toilet paper technology.
Don’t discount Chef Boyardee’s role as a catalyst in advancements in butt-cleaning technology.
While the auto manufacturers may not remove the DEF systems from the big diesel trucks you absolutely know the private modders are going to go buck wild. Especially now that they have zero reason to worry about fines that will put them out of business.
I think it’s important to distinguish between CAFE regulations on Fuel Economy, and other restrictions on Emissions. One thing that is actually very counterintuitive is that lower fuel economy does not necessarily mean lower emissions, even on vehicles with identical mechanicals. It’s been known for a while that the C6 Corvette Lean Burn mode can raise MPG significantly, and it’s fairly basic, just inject a bit less fuel, same air, and better MPG. What’s not intuitive however is this results in greater emissions. By burning further away from a proper 14.7:1 (assuming 0% ethanol) Stoichiometric ratio of air to fuel.
But running at a 16-18:1 or higher in “lean burn” territory, ie more air than is necessary, or less fuel, combustion temperatures are higher, and creates more oxides of nitrogen (NOx) which is around 300x more harmful than CO2 in terms of greenhouse warming effect. Again, these are generalizations, but the point here is important, if fuel economy is not heavily regulated but emissions are, the air quality impact will not actually be all that greatly impacted. Consumers will still want decent fuel economy, but ultimately companies may be able to increase power, decreasing fuel economy, but will still be required to keep within emissions limits. It’s the same basic reasons why diesel d-bags getting an extra 10mpg on their deleted diesel is not actually a good thing, sure they burn less fuel, but they do it in a way that is several orders of magnitude worse for the environment.
To say this is the better outcome over ditching emissions regs but keeping fuel economy rules is wildly underselling it. With emissions regs being kept, most automakers are heavily financially restricted to using engine platforms that can be sold elsewhere in the world, since developing any ICE powertrain to meet any emissions regulations is wildly expensive in todays world, and globalization of that platform is a must for profitability. Should emissions regulations be gone, just about any engine age or platform can be very simply reprogrammed to make way more power, burn way less fuel, or some combination of the two, or even just ditch expensive components like secondary air injection and some level of EGR tech, GPFs, etc. But would result in a very very large increase in emissions.
Besides, as mentioned below, CAFE was heavily flawed, and it’s removal may give companies the opportunities to sell lower priced, smaller cars, because they no longer have to produce poorly defined barges which fit into absurd CAFE blind spots.
I think Americans have shown a preference for poorly defined barges which fit into absurd CAFE blind spots.
I think manufacturers want us to want hose but we still try to buy small cars where can find them cheap.
I started off nodding my head – yes emissions and fuel economy are not related. Then you totally lost me at basically – we should get rid of CAFE. We have steadily improving fuel economy because of CAFE standards. We have steadily decreasing local emissions because of EPA emission standards. We have both of these AND cars continue to get more powerful, faster, and cheaper (adjusted for inflation)
We are living in a golden age of the automobile today and cars will only get better as more and more vehicles become hybrids.
Small cars are gone because they don’t sell – same with wagons, manual transmissions, and regular cab pickups.
Crazy is a great song. Trade wars are terribly stupid ways to help people.
Probably true, but that kind of decision isn’t what CAFE was intended to address anyway. I have a number of issues with CAFE as it currently stands, but one thing it did was push for the kind of incremental improvements in fleet economy that would not have otherwise happened. Consumers don’t care about a .1 MPG improvement in isolation, but multiply that by millions of cars sold each year and suddenly you have a meaningful impact.
The free market can’t fix pollution problems because it doesn’t factor in externalities. If you don’t have governmental oversight to push those costs back onto the people who can do something about them, nobody will.