As More Cars Disappear, Affordability Challenge Grows

First Up 12/03/18

Trump: China to 'Reduce and Remove' Tariffs on American Cars
China has agreed to cut tariffs on American-made cars, President Trump said on Twitter, apparently signaling Beijing’s readiness to make concessions to prevent further escalating trade tensions, reports The Wall Street Journal. “The two presidents instructed their economic teams to work toward the direction for removing all tariffs for win-win outcomes and mutual benefit,” Geng Shuang said, describing the outcome of weekend talks between Mr. Trump and Chinese President Xi Jinping at the G-20 Summit in Buenos Aires. The concession would be a notable one on Beijing’s part: U.S. automobile exports to China were worth $9.5 billion last year, according to the U.S. Department of Commerce, topped only by aerospace and agriculture exports. Mr. Trump announced the Chinese commitment to reduce tariffs in a tweet sent out late Sunday Washington, D.C. time, early Monday in Argentina. “China has agreed to reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40%,” he said. Read more here. 

How New NAFTA Deal Will Affect Automakers
President Donald Trump and leaders from Canada and Mexico on Friday signed a new trade deal that would replace the North American Free Trade Agreement, clearing a major hurdle in Mexican politics but setting up a likely battle for U.S. congressional ratification. According to The Detroit News, the signing comes a day before the Dec. 1 inauguration of new Mexican President Andrés Manuel López Obrador, who ran a populist campaign in which he frequently used President Donald Trump as a foil. It also follows an announcement from General Motors Co. on Monday that it would idle four U.S. plants, cut 8,000 salaried employees and threaten the jobs of 3,300 hourly workers. The signing of the new trade agreement sets off a 60-day calendar for the Trump administration to submit to lawmakers a list of changes to U.S. law that will be required for the deal to take effect. The congressional review coincides with a legally-required analysis by the U.S. International Trade Commission of the impact of the new trade agreement on the U.S. economy, which has to be completed by March 2019. Read more here. 

Keogh Starts VW Job with Dealer Face Time
With just a month under his belt since he became CEO of Volkswagen Group of America on Nov. 1, Scott Keogh isn't yet ready to lay out a comprehensive plan to fix what ails the German automaker's operations in the U.S. Maybe by January, Keogh says. In the meantime, reports Automotive News, the former longtime president of Audi of America has been out meeting with dealers, listening to their concerns and suggestions, and taking some initial steps to increase their throughput and put Volkswagen brand vehicles on more buyers' consideration lists. "My plan is quite straightforward: speaking to dealers the whole time, engaging dealers," said Keogh. "I want to hear what they have to say. There won't be any plan for going forward that hasn't been well-socialized among the dealers." Keogh said Volkswagen dealers need to see improved stability from the automaker in terms of production, as well as help with their profitability, which significantly lags other mass-market brands. Recalls remain an issue, he said, though the brand has been making progress. Read more here. 

As More Cars Disappear, Affordability Challenge Grows
With General Motors set to end production of its Chevrolet Cruze compact car next year, another high-volume, entry-level option will be crossed off American car buyers' shopping lists. On top of similar moves by Ford Motor Co. and Fiat Chrysler Automobiles, the demise of the Cruze adds to growing affordability challenges in the new-vehicle market. The continued death of cars is happening amid record-high prices and rising interest rates, but also shifting consumer tastes. According to Automotive News, some dealers anticipate buyers will continue to gravitate toward compact utility vehicles or perhaps just defect from the American automakers that are shedding cars like birds molting feathers. Consumers feel that affordability pinch especially when automakers drop car segments and focus more on crossovers, SUVs, and pickups, said Chad Martin, a Bowling Green, Ky., dealer selling 12 brands including Chevrolet. And while some are loyal to a specific brand, customers generally seem to be shopping for a particular type of vehicle, such as compact cars. So if an automaker eliminates that option, those shoppers likely will turn elsewhere. Read more here. 

LA Auto Show: 16 Cup Holders? 7 USB Ports? Inside the Family SUV Frenzy
Sixteen cup holders. Twenty-eight speakers. Off-road capability. Automakers introduced new family oriented SUVs crammed full of those features and many others at the Los Angeles Auto Show last week, aiming to attract buyers who are rapidly ditching sedans. According to The Detroit Free Press, it's the latest competitive dimension in the frenzied SUV boom – and much of it is targeted at families who want more room for their kids, their stuff, and their adventures. With passenger cars set to become virtually extinct at General Motors and Ford – and already virtually gone at Fiat Chrysler – automakers need to find fresh ways to make their SUVs stand out. And they know Americans love the idea of more. And not just more room. More connectivity. More safety. More fun. "It helps them differentiate their product among the sea of new products and new SUVs," says Jessica Caldwell, analyst for car-buying advice site Edmunds. "I think we’re going to continue to see automakers find new niches that don’t exist yet." Read more about the latest SUVs at last week’s LA Auto Show here. 

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