Auto Tariff Threat Grows More Ominous

First Up 06/11/18

Auto Tariff Threat Grows More Ominous
Steel and aluminum tariffs will hurt many manufacturers. But the value of imports covered by the duties is only $10.8 billion, a pinprick for a $19.5 trillion economy.  According to Automotive News, the real danger, economists and business groups say, is the cumulative effect of several pending tariffs and the risk that they will instigate a full-blown trade war or trigger the demise of NAFTA. Chief among them is President Donald Trump's threat to slap a 25 percent tariff on auto imports and car parts on national security grounds. There is little basis for such a threat. The domestic auto sector is booming and didn't seek relief from imports. But it can't be dismissed as political theater or a way to pressure trading partners for concessions. Until now, the Trump administration's aggressive proposals and bullying to correct trade imbalances were followed by horse-trading or backtracking to more modest outcomes, reflecting discord among White House factions feuding for control over trade issues. There's little of that discord left. The threatened steel and aluminum tariffs on major allies are now a reality, the U.S. just reinstated sanctions on companies that do business with Iran, a potential exit from NAFTA seems more likely, and new tariffs on Chinese imports are soon expected. Read more here

Auto Lenders Ramp Up Risk to Win More Customers
New risks are lurking in auto loans, reports The Wall Street Journal. As loan growth slows, banks and other lenders have been tinkering with loan terms in an effort to gain more consumers. They are originating a greater share of loans with repayment periods of more than five years and, in some cases, extending loans to consumers who are stretching further to afford their purchases. Banks such as TD Bank, Santander Consumer USA Holdings Inc. and BB&T Corp. , meanwhile, have said they are increasing their loans to riskier applicants. Their moves come at an unsettled time for auto lending. Sales growth has been choppy and missed payments are up from a year ago. Also, used-car prices are under pressure, raising the risk of higher losses for lenders when vehicles are repossessed. Faced with these headwinds, many lenders shunned applicants with low credit scores and have been looking for ways to make up the lost volume. Read more here

Growing Challenges Dent Dealers' Optimism
Dealers increasingly worry that rising interest rates and limited inventory could hurt vehicle sales and store profitability. According to Automotive News, that's a key conclusion from the latest Cox Automotive Dealer Sentiment Index, a quarterly survey of auto dealers. Though the retailers remained upbeat about the retail market, optimism in the second quarter slid from the previous quarter. "The challenges are growing in number," Jonathan Smoke, Cox Automotive's chief economist, told Automotive News. "And they almost become self-fulfilling prophecies of weaker sales in the future." The survey measures dealers' perceptions of the past 90 days and expectations for the next three months. It identifies key factors affecting retailers' optimism or pessimism. The latest survey, conducted April 30 to May 14, had 1,053 franchised and independent dealer respondents. Responses were weighted by dealership type and sales volume to represent the national dealer population. The responses are used to calculate what's known as a diffusion index, in which a number greater than 50 indicates that dealers view conditions as strong. Read more here

Kia Recalls Over 500K Vehicles for Air Bags
Kia is recalling over a half-million vehicles in the U.S. because the air bags may not work in a crash, reports The Detroit News. Combined with a previous recall expansion by Hyundai, the affiliated automakers are recalling nearly 1.1 million vehicles due to the problem, which has been linked to four deaths. The moves by both Korean automakers came after the National Highway Traffic Safety Administration opened an investigation into the problems in March. The safety agency said at the time it had reports of six front-end crashes with significant damage to the cars. Four people died and six were injured. Vehicles covered by the Kia recall include 2010 through 2013 Forte compact cars and 2011 through 2013 Optima midsize cars. Also covered are Optima Hybrid and Sedona minivans from 2011 and 2012. Read more here

5 Ways That BMW Hopes to Stand Out with Latest X5 SUV
BMW's X5 has gotten smart. Really smart. According to USA Today, the German automaker is showing off the latest version of its X5 SUV and touting its latest features. In addition to heated and cooled cup holders and four-zone air conditioning (yes that's a thing), the luxury car maker is also offering new off-road and high-tech comfort controls for a smooth ride even on gravel. The X5 is among four models made at the Greer, S.C., plant, with the X3, the X4, and the X6 rounding out the pack. Later this year, the plant will add its fifth and largest SUV to the plant's production line, the X7. Ever since its introduction to the international car market 20 years ago, the X5 has been produced exclusively here in South Carolina. All told, 2.2 million of the SUVs have sold worldwide, according to the company. So far in 2018, the plant has produced more than 76,000 of them. Click here for the five ways that BMW hopes X5 will stand out.

June Webinar: Modern Search for Automotive Dealerships
June’s exciting AutoTalk webinar will be presented by Kelly McNearney, Senior Automotive Strategist and Peter Leto Head of Industry – Automotive Retail Sales, Google, Inc.

Kelly and Peter will discuss:

  • The latest data on automotive shoppers

  • How to identify and communicate with customers in your market

Happening Tuesday, June 19, 2018. Sessions held at 10:00 a.m. EDT and 4:00 p.m. EDT. To register, click here.

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