💃 January 21: Tariff Tango, Incentive Snafus, and Dealer Disputes

The Gist

🌎 Tariff Watch: Trump’s trade memo hints at sweeping import duties, leaving automakers bracing for supply chain shakeups and sticker shock for buyers.

🍁 Rebate Freeze: Canada’s EV incentives ran out of cash, leaving Ford, GM, and Hyundai to foot the bill while raising questions about U.S. program sustainability.

🚨 Braking Bad: Honda’s AEB glitch triggers surprise stops, while Ford’s BlueCruise faces scrutiny after two fatal crashes involving stationary vehicles at night.

⚖️ Scout Showdown: VW-backed Scout Motors clashes with California dealers over direct-to-consumer sales, reigniting the franchise vs. direct sales debate.

BUSINESS

🌍 Trump’s Tariff Tango: Who Pays the Price?

As Donald Trump steps back into the Presidency, he’s kicking off his second term with bold talk of tariffs and trade overhauls.

While he didn’t slam the tariff hammer on day one, his Monday memo has laid the groundwork for what could be a seismic shift in how the U.S. does business with the rest of the world. Industries are bracing for impact, and the auto world is no exception.

What’s Actually Happening?

No immediate tariffs (for now), but Trump’s memo directs federal agencies to reevaluate trade with China, Canada, and Mexico. It’s a setup for potential duties ranging from 10% on global imports to a staggering 60% on Chinese goods.

Trump says these policies will “tariff and tax foreign countries to enrich our citizens.”

Markets, of course, had feelings:

• Stocks Took Off: Investors liked the temporary tariff reprieve.

• The Dollar Dipped: A sign that long-term uncertainty still looms large.

Who’s Feeling the Heat?

1. Auto Industry:
   Let’s not sugarcoat it—this could get messy. About 50% of U.S. auto parts come from Canada and Mexico, the backbone of North American supply chains. Tariffs would force automakers to either eat the costs, or pass them on to consumers.

   • Full-size pickups, like GM and Stellantis’ highly profitable trucks, could take a huge hit since many are built in Mexico.

   • U.S. dealerships may face headaches stocking affordable vehicles as prices climb.

2. Your Grocery Cart:
   Brace yourself for pricier guac and beer.

   • Avocados: Mexico supplies 90% of U.S. demand. A tariff here would make avocado toast even more of a luxury.

   • Beer: Brands like Corona and Modelo—both imported from Mexico—could see price hikes that may leave you rethinking happy hour.

3. Everything Else:

   • Sneakers, toys, and furniture: Many of these staples are made in China, and tariffs could jack up prices across the board.

   • Retailers might try to absorb some costs, but with inflation still pinching wallets, expect sticker shock to land squarely on consumers.

What Does This Mean for Dealers?

For auto dealerships, Trump’s trade shake-up could be a double-edged sword. Tariffs on parts and vehicles could disrupt supply chains and tighten margins, but they also create an opportunity to double down on the “made in America” narrative—if buyers are willing to pay the premium.

And don’t forget, uncertainty drives hesitation. If consumers pause big-ticket purchases while they wait for clarity, dealers may need to adjust their game plans to keep sales rolling.

The Bigger Picture

This isn’t just a story about cars or guacamole. Trump’s trade strategy could rewrite the rules for everything from supply chains to consumer spending. Industries and individuals alike are watching closely to see how it all unfolds—and preparing for the ripple effects.

🍁 Canada’s EV Incentive Freeze: A Harsh Wake-Up Call

As Donald Trump’s tariff plans remain uncertain, Canada is grappling with its own economic curveball.

This week, the country’s federal EV rebate program ran out of funds, leaving dealers, automakers, and buyers scrambling for solutions.

Here’s what went down north of the border and why U.S. dealers might want to pay attention:

What’s the Deal?

Canada’s Incentives for Zero Emissions Vehicles (iZEV) program, which offered buyers up to $5000 off qualifying EVs, was abruptly halted when funds dried up months ahead of schedule. Initially planned to last until March 2025, the program’s popularity—and growing EV sales—quickly drained its resources.

For now, Ford, GM, Hyundai, and Nissan are stepping in with their own rebates to fill the gap. But this patchwork solution raises questions about the long-term viability of such programs.

Cracks in the System

Several challenges are bubbling to the surface:

1. Unrealistic Targets: With 2035’s 100% ZEV sales goal looming, funding gaps could derail progress.

2. Charging Woes: Canada’s infrastructure rollout is lagging behind EV sales growth, adding another hurdle.

3. Consumer Confusion: The sudden pause has caught buyers off guard, undermining confidence in future incentives.

What Does This Mean for U.S. Dealers?

Canada’s funding freeze offers a cautionary tale for the American auto industry. Without a steady pipeline of incentives, EV adoption could face similar setbacks:

Immediate Concerns:

• Sticker Shock: If U.S. incentives disappear, price-sensitive buyers may pause purchases or shift back to gas-powered options.

• Dealer Impact: Automakers might mimic Canada’s approach by covering gaps themselves which could mean tighter margins at the dealership level.

Long-Term Risks:

• Adoption Slump: Without support, the ambitious EV targets in both countries may fall flat, leaving inventory unsold.

• Policy Precedent: Canada’s abrupt pause may influence U.S. policymakers considering cuts to EV programs.

🚨 Honda and Ford Under the Scrutiny

The U.S. National Highway Traffic Safety Administration has ramped up its investigations into two major automakers, Honda and Ford, over safety concerns tied to advanced braking and hands-free technologies. Here's what we know:

Honda’s Braking Blues

The Issue:
The NHTSA has expanded its probe into 295,125 Honda vehicles (2019-2023 Honda Insight and Passport models) after reports of automatic emergency braking systems triggering inadvertently.

Key Findings:

• Complaints Galore: 106 reports have been filed, including three crashes and two injuries.

• Rapid Deceleration Risk: Sudden braking increases the chance of rear-end collisions.

• Engineering Analysis: Honda’s system is under deeper scrutiny, a necessary step before any potential recall.

• Honda’s Response: The automaker suggested that some drivers may not fully understand the system's capabilities and limitations.

Ford’s BlueCruise Battle

The Issue:
Ford’s hands-free driving technology, BlueCruise, is under fire following reports of two fatal crashes. The probe covers 129,222 vehicles from the 2021-2024 model years, including the Ford Mustang Mach-E.

Key Findings:

• Fatal Collisions: In both incidents, the Mach-E vehicles collided with stationary cars while traveling at over 70 mph on highways at night.

• Detection Limits: BlueCruise struggles to detect stationary vehicles under certain conditions, like nighttime lighting.

• Scope of Tech: The system operates on 97% of highways in the U.S. and Canada but relies on drivers staying alert through camera-based monitoring.

⚖️ Scout Motors vs. California Dealers

Scout Motors, the newly revived electric vehicle brand under Volkswagen Group’s umbrella, is pushing back against claims from the California New Car Dealers Association that its direct-to-consumer sales strategy violates state laws.

At the heart of the dispute? A new California vehicle code amendment aimed at protecting franchised dealers from competition by automaker affiliates.

Scout’s Stance

In a letter addressed to the CNCDA’s lawyer, Scout Motors’ general counsel Neil Sitron says:

• Scout Stands Alone: Scout Motors is operating independently of Volkswagen Group of America and its brands. The company stated that VWGoA has no control over Scout's management, operations, or South Carolina manufacturing plant.

• No Dealer Entitlements: Sitron firmly declared that "Volkswagen-brand dealers have no right to Scout-branded vehicles" and warned against intimidation tactics.

• Ready for Legal Action: If challenged, Scout says it will “vigorously defend” its direct sales model.

Dealer Pushback

• The Argument: The CNCDA claims that Scout, as a VW affiliate, is barred by California law from selling directly to consumers in competition with franchised VW dealers.

• Backed by NADA: With the National Automobile Dealers Association joining the fray, the stakes are higher than ever. Outgoing chairman Gary Gilchrist labeled direct-to-consumer strategies “plainly illegal” and pledged support for state-by-state legal challenges.

• Prepared to Fight: Brian Maas, CNCDA president, reiterated that the association’s stance has not changed and legal action remains on the table.

The Bigger Picture

This dispute is part of a broader battle between traditional dealerships and the rise of direct-to-consumer brands like Tesla and Rivian. Legacy automakers dipping into direct sales—like VW with Scout or Honda with its Sony-backed Afeela EV—are adding fuel to an already contentious fire.