Or any other cars for that matter?
America, the land of the free, home of the brave, and host to one of the most turbulent and divided election seasons in recent (or extended) memory. All it took was a quick glance on Facebook and a conversation with disgruntled or ecstatic voters to get a picture of how divided the country was upon learning that Donald Trump had just become the 45th US president. The financial markets were thrown into tumult, and although the auto industry tried to put on a brave face you know Ford, GM and FCA were nervous.
That's because Donald Trump has been a highly outspoken critic of the auto industry’s tendency to move production of low-profit vehicles abroad to Mexico and Canada, taking advantage of the North American Free Trade Agreement to get more bang per buck. The idea is to pay lower wages to Mexican and Canadian workers and later import vehicles to the US tax-free. As a result, jobs in the US are lost, although that doesn’t mean there aren’t benefits involved for both automakers and consumers. That’s because the decreased spending allows car companies to build vehicles that usually have thin profit margins, which in turn let's them sell said cars to American buyers who may not have been able to afford a new car otherwise.
It also lowers the price of new vehicles built abroad. All of these things save US automakers money, and that's why they build outside the country. Given the unpredictability of this political season, no one is quite sure what will happen when Trump is sworn in on January 20th, 2017. He has has repeatedly mentioned that NAFTA, the trade agreement keeping the North American auto industry in the free-flowing state in which it currently exists, would be struck down. If he did that, it would impact everything. Take the Dodge Charger and Challenger, for example. We recently tested a Challenger and found it to be much different in character from its Ford Mustang and Chevrolet Camaro competitors.
However, it also differs in the fact that it’s the only muscle car of the group that’s built outside of the US. Ford builds the current Mustang in Flat Rock, Michigan, and Chevrolet moved the Camaro’s production from GM’s Oshawa, Ontario, Canada assembly plant to Lansing, Michigan, where it also produces the Cadillac CTS and ATS, all vehicles built using GM’s Alpha platform. Meanwhile, Dodge builds both the Charger and Challenger at its plant in Brampton, Ontario, Canada. If Trump trashes NAFTA, how exactly will this change the price of the two muscle cars? As one would expect, the impacts will be felt by both FCA and consumers. With import taxes suddenly coming into play, expect to pay more for these cars.
Automotive News quoted Charles Chesbrough, senior economist and executive director of strategy and research at the Original Equipment Suppliers Association, as saying, “Trump’s trade policies could add $5,000 or more to the price of a small car from Mexico." Similar price increases could be expected for both the Challenger and Charger. Even if Dodge makes the investment to bring manufacturing of these cars into the US like Chevrolet did with the Camaro, the cost of the move and higher wages could be reflected in the price. Much like Brexit, Trump’s support of higher tariffs on imports in efforts to keep production within our soon-to-be-taller border walls could do more than raise the price of our favorite cars.
It could also isolate the US auto industry, ensuring that more cars built here are strictly for US buyers since the trade war is also likely to hurt exports. The decreased profits from exports could in turn make automakers wary of investing in making cars both US and EU compliant, forcing them instead to focus on models that can be purpose-built for a single region. As many states remained for long periods on election night, the results Trump’s victory will have on the auto industry are too close to call. But buckle up because it’s sure to be a wild ride, especially given our president-elect’s opinions on the EPA. This is good for gearheads and bad for the environment.
Trump’s stance on climate change could impact the CAFE standards that are forcing automakers to curtail emissions with turbochargers and smaller engines. If caps on carbon emissions are loosened, we could once again see a time where large displacement engines replace smaller turbocharged units, offering more horsepower in exchange for dismal fuel economy. This would only be seen on the new wave of cars built in America exclusively for the American market since European regulations are only getting stricter. Even with a newfound freedom to enlarge engines, automakers would likely stay with building fuel-efficient cars since there's a decent chance that the free-wheeling times of relaxed CAFE standards wouldn't last.
Ultimately, nobody knows just what impact Trump’s presidency will have on these next few months, years, or even decades. We do know one thing, though: there will be no shortage of entertainment.