Good resolutions are simply checks that men draw on a bank where they have no account
—Oscar Wilde, in The Picture of Dorian Gray
I was going to title this Motor Mouth “I told you so.” Unfortunately, the good editors that come up with the headlines for my columns suggested — unsurprisingly — that wouldn’t be good for either readership or the “clicks” they so desire. So, “Four fearless New Year’s predictions” it is.
That doesn’t change the fact that, well, I told you so. I’ve gotten pretty good at this Nostradamus stuff as of late. For the last year or so, for instance, I’ve been proclaiming — even though I’ve been much derided for it — that Donald Trump and Elon Musk would eventually be proven to be brothers from a different mother, and now, well, they’re basically living together at Mar-a-Lago.
More recently, I’ve been telling everyone who would listen that the only reason Elon Musk was supporting Donald Trump’s re-election was that he wanted to clear the road for his lidar-less self-driving cars. No surprise then — at least to me — that the Trump transition team recently promised to end collision-gathering data for autonomous automobiles. That would seem to put a pretty emphatic end to all the investigations into Tesla’s Autopilot, as well as opening things up for the camera-driven robo-taxis Musk insists are Tesla’s future.
All that to say, as outlandish or controversial as some of the following prognostications may be — that China’s projected dominance of our industry is far from assured; that Musk’s ability to influence self-driving regulations may be time-constrained; and, perhaps most contentious of all, that Donald Trump might not be the (complete) moron so many think he is — there’s at least an odds-on chance that many of the following will prove prescient.
The Chinese only have about five years to take over the world
I’ll start these prognostications with what is surely the most blasphemous prediction of all: namely that the takeover of the global automotive industry by Chinese automakers is not only not inevitable, but, I suspect, also time-constrained.
My putting a best-by date on the country’s success may sound outlandish, given that a) they lead the field in advanced battery manufacturing by perhaps as much as five years; b) they have by far the largest and most influential auto market on the planet these days; and c) the media claims they’ve got pretty much all legacy automakers on their heels. Heed the histrionics and it sounds as if we’d be lucky if Ford is still be building pickups in 10 years.
Except that China — the government this time — is pushing its auto industry the same way it’s ballooned its real estate market. For those that don’t know — and those who have forgotten — let’s remember the same authorities that are subventing the over-production of EV batteries are the very same people who are destroying the country’s real estate market by vastly over-building cities. According to The Economist, as many as 30 million Chinese households “have paid for apartments that have never been built.”
And, for the record, according to American Under Secretary for International Affairs Jay Shambaugh, China will have the capacity to manufacture70 million electric vehicles by 2030 (almost three times its domestic market). The difference, of course, is that you can’t export real estate like you can cars. Hence, China’s desire — desperation? — to conquer foreign automotive markets, especially Europe and North America.
However, if I am reading the tea leaves the Wall Street Journal and others are brewing, they may have a limited amount of time for said conquest. According to the WSJ, “China is drowning in debt, reeling from a property bust that wiped out trillions of dollars of household wealth,” and worse yet, Xi Jinping, the most powerful Chairman since Mao, sees party purity more important than the rapid growth we’ve come to expect from The Red Dragon.
There’s more doom and gloom surrounding the Chinese economy than at any time in the last 30 years — Richard Koo, chief economist at Nomura Research Institute, told the Journal that China is in “a race against time” and Xi Jinping would seem to be pinning much of his hopes for recovery on electric-vehicle exports.
In other words, there might be a limited time-frame for that nation’s supposedly unstoppable conquest of our auto industries. For those tempted to ridicule this assertion, know that, despite the fact EVs should soon represent more than 50% of China’s 26-million-strong domestic auto market, shares in virtually all its domestic automakers were all down for 2024. No wonder The Economist made comparisons between China’s current state of affairs and that of mid-’80s Japan, which, astute readers of economic history will remember, was likewise promised to decimate North American prosperity.
Like China, Elon Musk only has a limited time to cement his domination of autonomous automobiles
I outlined half of this prediction a couple of months ago, but the machinations remain onerous — and time-dependent — enough that they bear repeating.
The first part of that equation is that, as I mentioned, the only reason Musk supported Donald Trump’s election campaign to the tune of USD$272 million — and is, according to no less than Steve Bannon, the reason why MAGA-man got re-elected — is so he can influence the standards that future self-driving cars will need to meet. Goal attained, the Trump transition team, as I mentioned, is now promising to eliminate accident data reporting for autonomous cars. Conflicts of interest aside — massive conflicts — TSLA is up some USD$200 billion. Not a bad return on investment, even by Musk-ian standards.
The next step, as I said back in December, is to influence the writing of the regulations by which all robo-taxis of the future are licensed. Pretty much everyone had previously surmised that, when a national standard was written, it would require lidar sensors, a technology Musk refuses to adopt. Now that Musk is Mr. DOGE — ostensibly in charge of gutting, amongst others, the very agency that regulates transportation — I’m pretty sure we’ll find camera-based systems like Tesla’s will suddenly, magically make the grade.
Except that time may not be on his side. All Trump’s “key advisors” have a limited lifespan, but Musk’s tenure as the bro-du-jour may be particularly short. Musk recently contravened the golden rule of never showing up the president-elect by singlehandedly torpedoing a recent spending bill (Trump only got on board after it was obvious Musk’s Tweet-fest was having an effect). And the growing disparagements of Trump’s station in the hierarchy of government (my favourite being Trump’s designation by some as President In Name Only [PINO]) are not, if history be any judge, the road to long-term employment with Team Trump.
Hell, Musk’s already riled up the MAGA masses with his defence of H1B visas (I suspect it didn’t help when he told his detractors to “F@*K YOURSELF in the face”). If Elon really intends on writing the rule book for the robo-taxis he says are Tesla’s future, he better get his motor running; I don’t think The Donald is going to put up with his shenanigans for much longer.
Canada must break with Mexico in USMCA negotiations
As it turns out, Trump isn’t a (complete) moron. Oh, to be sure, his rhetoric is juvenile and his mandates mindless. But his identification of issues, well, sometimes they’re spot-on. So, even though a blanket tariff of 35% on all Canadian and Mexican goods is idiotic — not to mention self-harming — his demand that the United States-Mexico-Canada Agreement be immediately renegotiated is, in fact, probably warranted.
The problem is that, although the USMCA is exceedingly strict about the requirements for North America auto production — minimum salaries for workers, a quota for the “domestic” content in each car that claims to be “North American-made” must have, etc. — the penalties for non-compliance are ridiculously small. In fact, automakers are charged just 2.5% if their cars are not USMCA-compliant. In other words, it’s a lot — and I do mean a lot — cheaper to just pay the paltry two-and-a-half points on their manufacturing costs than to meet all the rules (not to mention fill out all the paperwork).
I told you so—I’ve gotten pretty good at this Nostradamus stuff as of late
As Motor Mouth mentioned in December, some Mexico-based automakers have decided to skip the formalities and just pay the puny penalty. What we didn’t quite capture is the extent of the malfeasance. While Canada has more or less stuck to the rules, according to the 2023 report on USMCA Automotive Rules of Origin: Economic Impact and Origin, 468,000 Mexican-made cars entered the United States subject to the 2.5% tariff, rather than being duty-free under USMCA. Do the math and that means fully 20% — one in five — cars exported from Mexico did not comply with the rules Canada follows so stringently.
And, as it turns out, this is a rapidly growing problem, those almost half-a-million non-compliant Mexican-built cars being shipped to the U.S. in 2023 are 20 times the number that breached the rules in 2016. So, as difficult as it may be for many to admit, Trump really isn’t wrong that the USMCA needs to be revisited. We really do have to distance ourselves from Mexico.
MAGA might become synonymous with “self-harm”
Just as global competition in the auto industry ramps up, Trump’s self-destructive 25% tariffs will make America — indeed, all of North America — less competitive. China, as I said above, may encounter some long-term headwinds, but, in the short term, they have a huge technological lead in battery manufacturing and are the world’s leaders in low-cost EV production. In terms of North American auto production — which environmentalists, desperate to get as many EVs on the road as possible at any cost, seem scandalously willing to sacrifice — it really is, as Motor Mouth has often proposed, us or them.
Forcing tariffs on your industrial partners (that would be us and Mexico) and alienating your friends (that would be European automakers) while simultaneously trying to fend off the greatest challenge to American hegemony since mid-’80s Japan is, well, just plain stupid. Or, as John McNally, Senior Advisor for Scotiabank Economics’Climate and Socio-Economic Policy Research, said in a not nearly widely enough read report, “turbulence is unlikely to make the plane go faster.”
More to the point, McNally’s “Freeways and Free Trade: North American Automotive Markets Expect Shocks To Come” suggests opportunities for competitiveness and investment in all three countries are readily abundant, but only if leaders aiming to support the sector spend their time “focused on growing the pie” — and this is the part that Trump so desperately doesn’t seem to understand — “instead of obsessing over how to divide it.”
My last prediction, then, is that the automobile industry would be much better off if the Trump transition team hired Mr. McNally as a senior advisor. Perhaps then his beggar-thy-neighbor tariffs would quietly go away.
For those looking to understand more of the issues facing the automotive industry, please join us for the first of Driving into the Future’s 2025 expert panels: The State of the Auto Industry 2025.You can sign up for free here.
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