Automakers have struggled in 2018, and conditions may continue to worsen throughout the rest of the year. International sales are slowing as interest rates rise in the US against increasing delinquencies on car loans. Even with NAFTA re-negotiations moving forward, it may spell even more trouble for auto manufacturers as tariffs in Europe and China loom large.
The latest news in autos is the preliminary agreement upon a NAFTA replacement by the US and Mexico. While not all details are available, we do know that North American content in light vehicles will need to rise to at least 75% from the current 62.5% requirement to avoid automobile tariffs. Vehicles must use more domestic steel and aluminum, with more parts made domestically, and much of the manufacturing labor must be provided by workers earning at least $16 per hour. These provisions will undoubtedly raise prices on Mexican-built cars and lead to higher prices in the United States. Higher prices would initially seem like a good sign for automakers, but in reality, more buyers may end up priced out of the market. Already, in anticipation of tariffs, used car prices, which typically decline in summer, have been rising for 10 straight weeks now. This could indicate that buyers will be rushing to invest in used cars, as opposed to new cars – hurting auto manufacturers . . .