Automakers add U.S. production: Here's what you need to know
By CNBC Television
BusinessFinanceTechnology
Share:
Key Concepts:
- US Auto Production Increase
- Tariffs (25% on vehicles from Canada, Mexico, Asia, and Europe)
- USMCA (United States-Mexico-Canada Agreement)
- Excess Capacity Utilization
- Sales Rate Slowdown
- Average Transaction Price (ATP)
- North American Margins
- Foreign Automaker Strategies (absorbing costs vs. US manufacturing)
US Auto Production Increase Post-Tariffs
- Main Point: US auto production is gradually increasing after the implementation of tariffs on vehicles imported from Canada, Mexico, Asia, and Europe.
- Details:
- J.D. Power data shows the percentage of vehicles sold in the US that were built in the US has increased:
- Q1: 51%
- April: 54%
- May: 55%
- June: 56%
- Automakers are utilizing excess capacity in US plants by adding shifts and overtime.
- J.D. Power data shows the percentage of vehicles sold in the US that were built in the US has increased:
- Explanation: Automakers are shifting production to the US to avoid the 25% tariffs.
Sales Rate and Transaction Prices
- Main Point: While production is increasing, the sales rate is slowing down, and average transaction prices have remained relatively stable.
- Details:
- Cox Automotive reported a sales pace of 15.3 million in June.
- The average transaction price (ATP) in June was $48,907, only slightly higher than in April and March.
- Explanation: Initial concerns about skyrocketing prices due to tariffs led to a surge in sales in April, but the market has since stabilized.
Automaker Responses: Ford and GM
- Main Point: Ford and GM have been quick to take advantage of excess capacity in their US plants.
- Details:
- Ford's Q2 sales in the US were up 14.2%.
- GM's Q2 sales in the US were up 7.3%.
- Explanation: These companies are strategically increasing US production to capitalize on the tariff situation.
Impact on North American Margins
- Main Point: The key question is the impact of tariffs on North American margins, considering that some vehicles are still imported from Canada and Mexico.
- Explanation: While automakers are increasing US production, they still rely on imports, and the tariffs could affect their profitability.
Foreign Automaker Strategies
- Main Point: Foreign automakers face a decision: absorb the tariff costs in their margins or establish manufacturing plants in the US.
- Explanation:
- Some automakers may choose to spread the costs across their global platforms.
- Others may consider building US plants to avoid tariffs altogether, although no one has committed to this yet.
- The existing 25% tariff on European cars is already costing German automakers billions.
Conclusion
The implementation of tariffs has led to a gradual increase in US auto production as automakers utilize excess capacity. While sales rates have slowed, average transaction prices have remained relatively stable. Ford and GM have been proactive in shifting production to the US. The long-term impact on North American margins and the strategies of foreign automakers remain key questions.
Chat with this Video
AI-PoweredHi! I can answer questions about this video "Automakers add U.S. production: Here's what you need to know". What would you like to know?
Chat is based on the transcript of this video and may not be 100% accurate.