Auto File: China Cries Foul On Tariffs

Lithia Motors

25/06/2024 16:00

By Nick Carey
European Autos Correspondent
    
Greetings from London!
    
It’s June and while many Europeans are focused on the Euro 2024
soccer tournament, on goals scored and fouls missed, and whether
their team can make it into the knockout rounds, there are other
bigger winner-take-all competitions looming on the horizon the
auto industry has eyes on.
Over the next two weeks voters in Britain and France will go to
the polls. 
While the UK election will matter for automakers looking to
influence government mandates for electric vehicle sales (more
on that below) in particular, the French election could impact
auto policy both at home and in the European Union, especially
if the far-right performs well.
All this as China ups its rhetoric over a possible trade war
over EU tariffs on Chinese-made EVs (more on that below)
And while most Americans are getting ready for grilling and
fireworks next week when they celebrate their independence,
market research firm Cox Automotive released research today
showing that three-quarters of the car shoppers and 81% of
dealers it polled expect the presidential election in November
to impact the U.S. economy. 
Though it’s months away, the election looms large and raises big
questions about policies that affect automakers, especially when
it comes to EVs.
Cox says the industry is entering a “season of uncertainty,” as
60% of consumers said the election will affect their next
vehicle purchase and 78% told Cox they expect the election to
influence their decision-making when it comes to making a
big-ticket purchase other than a car. 
“This new research reminds us that elections breed uncertainty,
and when big-ticket purchases like automobiles are on the line,
uncertainty is the enemy,” said Vanessa Ton, Cox’s senior
manager for research and market intelligence. 
All that while the industry struggles with a cyber-attack that
comes at a delicate time for U.S. dealers. 
It looks like it’s going to be a long summer.
    
Which brings us to today’s Auto File…
    * China presses EU on tariffs 
    * S. dealers’ hacking shock
    * Stellantis’ yellow card for UK EV mandates

 
 
    China issues tariff red card
  
         
  
China continues to press the European Union on provisional
duties the European Commission plans to impose on EVs made in
China ranging from 17.4% to 38.1%, on top of its standard 10%
tariff for car imports.
The Chinese government’s efforts to up the pressure include
threatening that the tariffs could cause a trade war and that it
may impose provisional anti-dumping measures on pork from the
EU. 
China's Premier Li Qiang used a speech at a World Economic Forum
meeting in Dalian to hit back at U.S. and EU accusations that
Chinese firms benefit from unfair subsidies. All this while
complaining that the Commission sought unprecedented amounts of
information on Chinese automakers’ supply chains.
After both sides agreed to negotiate a compromise, China said
the EU should scrap tariff plans by July 4.  
There is little chance of that happening while haggling
continues over the formation of the next European Commission
following European parliamentary elections last week. 
July 4 also happens to be the date the Commission should publish
a lengthy document detailing the ongoing investigation into
Chinese EV subsidies and its findings. The provisional duties
should then apply the following day.
The pressure from China appears more focused on EU members, as a
qualified majority of 15 EU countries representing 65% of the
bloc’s population can block the tariffs once the Commission
makes its definitive proposal later this year.
Germany in particular has been reluctant to risk a trade war
with China that could hurt its own automakers. While visiting
China at the weekend, Germany’s economy minister insisted that
the tariffs were not a “punishment.”
In the meantime, Canada joined the fray, saying it was
considering imposing tariffs on Chinese-made EVs as it seeks to
align itself with allies. 
 
Recommended reading:
    * Why Americans don’t buy more EVs 
    * The rise of fake U.S. airbags 
    *         Reimagining Chinese EVs?

 
    Hack sends US dealers back to the Paper Age 
  
        
  
At this time of the year, America’s car dealers are busy trying
to get vehicles out the door to hit end-of-quarter and half-year
targets, with one eye focused on July 4 sales – what screams
independence louder than a new set of wheels, after all?
But hackers have chosen their timing carefully in targeting U.S.
dealers with a cyber-attack on car industry technology provider
CDK that has affected more than 15,000 dealer locations across
the United States. 
That hack has forced some dealers to resort to the mountains of
paperwork rendered obsolete by the digital age, as CDK's dealer
management system is used to complete deals, track store
profitability and monitor employee compensation.
This has "significantly slowed down" the U.S. auto retail
industry, Cliff Steinhauer, an official at The National
Cybersecurity Alliance, told Reuters.
An intelligence analyst at security firm Recorded Future says a
hacking group called BlackSuit is behind the cyber-attack, but
CDK has not confirmed that. Bloomberg  reported that a group of
hackers claiming responsibility for the attack has demanded
millions of dollars in ransom to end the hack.
While market research firm Cox Automotive said the hack’s impact
could be less than feared and most of sales would likely bounce
back in July, major dealer groups including AutoNation, Peer
Lithia Motors, Asbury Automotive all said it would have a
negative impact on business until CDK’s systems were fully
restored. 
The cyber-attack highlights the risk to an industry that has so
far got off lightly when it comes to hacks, with firms far
beyond CDK likely scrambling to bolster their defenses,
especially if there is a ransom and it gets paid. The prospect
of payouts worth millions of dollars will not go unnoticed.
In conversation with reporters on Tuesday, Cox’s chief economist
Jonathan Smoke said the hack also “adds to the uncertainty” for
U.S. consumers ahead of the election in November.
 
    UK EV mandates has Stellantis seeing red
  
        
  
Britain’s singular approach to the EV transition has left
Stellantis threatening to axe its UK production unless the next
government does more to help spur consumer demand or find ways
to offset expensive mandates. 
The European Union has set targets for CO2 emission reduction
that are easier to hit because they allow automakers to rely on
a mixture of fully electric cars, hybrids and more
fuel-efficient fossil-fuel cars.
The UK government has instead set ambitious EV sales targets –
what it calls the “ZEV mandate” – which entail heavy fines of
around $19,000 per non-compliant car. The government mandates
that EVs make up 22% of automakers’ sales this year, while only
around 16% of new cars sold this year qualify.
Those mandates ramp up steadily to 80% by 2030. 
But the auto industry complains that while the UK government has
applied plenty of stick, there is no carrot for consumers
because subsidies for private buyers have all been phased out.
Stellantis argues that demand for EVs is not there and the UK’s
next government needs to do more to spur consumer demand, or
allow it to count the electric vans it makes in the country
toward its targets even if those vans are exported.
The automaker’s UK managing director Maria Grazia Davino says
Stellantis wants to keep its production in the country, but that
if there is no movement on the mandate the company will decide
on the future of its two British plants in under a year.
In the meantime, to meet the targets, Stellantis will likely
import fewer fossil-fuel models, which Grazia Davino said will
hurt dealers. 
The UK general election will be held next week, so the timing of
Grazia Davino’s comments is no accident and the message to the
next government is clear: this isn’t working. 
 
    Fast Laps
  
        
  
    EV maker Rivian’s 
    push to cut costs and turn its first profit has removed over
100 steps from the battery-making process, 52 pieces of
equipment from the body shop and over 500 parts from the design
of its flagship SUVs and pickups, the company told Reuters.
Cutting costs is critical for Rivian and other EV startups as
high interest rates have turned some potential customers off EVs
that are typically more expensive to buy than their
gasoline-powered counterparts.

    EV startup Fisker, which failed in its own battle to cut
costs and minimize cash burn, is headed towards liquidation,
attorneys said in U.S. bankruptcy court, as two creditor
factions previewed a battle over which group will be paid first.
    
EV sales are surging in Southeast Asia, led by China's BYD  and
Vietnam's VinFast , eating into the internal combustion engine
car market dominated by Japanese and Korean firms, Counterpoint
Research said. 

    Honda has been accused by the U.S. National Labor Relations
Board of violating the rights of workers at a Greensburg,
Indiana factory by illegally cracking down on union organizing.

A fire at a lithium battery factory in South Korea caused by
exploding batteries killed 22 workers on Monday, most of them
Chinese nationals.
    
    Tesla and opponents of Elon Musk's compensation clashed on
Friday over ways to resolve the legal quagmire that has engulfed
the CEO's $56 billion pay package and billions of dollars in
potential legal fees generated by the case.
    
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 (Editing by Emelia Sithole-Matarise)