While it may feel like there’s been a concerted effort by the United States to remake its environmental policy in such a way as to completely ignore the existence of the environment, the reality is that there are so many different initiatives being undertaken at the same time that they can sometimes be at cross-purposes. A good example is a recent decision regarding aluminum and steel products, which are necessary both for electric cars and your sweet aftermarket exhausts.
The Morning Dump is treading familiar ground today, so why not talk about Tesla? The company is likely to face a class action lawsuit over its self-driving claims in California, and this particular ruling sets a potentially worrisome precedent for the automaker. While TMD is in California (though your author is on the East Coast), let’s check out another electric carmaker there: VinFast. It just opened up its first dealership in the state as it pivots away from a pure direct sales model.
And, finally, Amazon is getting into the used car space, but the competition isn’t that worried.
Aluminum And Steel Tariffs Come For Aftermarket Products, Derivatives
I have previously discussed the logic of steel and aluminum tariffs here, so I won’t get into too much detail. It is not uniquely the viewpoint of this current administration that America needs to be able to produce some amount of its own raw materials. While there’s a cost savings to making things cheaper in other places, there are legitimate reasons why you don’t want to be reliant on distant countries for the basic building blocks of everything.
On the other hand, you can’t just suddenly build up a huge steel and aluminum manufacturing base in the United States overnight. There’s also questionable logic behind producing energy-intensive aluminum here when Canada is right there and has smelters running that can process aluminum at a much-reduced cost.
Nevertheless, the current administration has targeted both steel and aluminum for massive tariffs. The initial tariffs were focused on the raw material itself, but a new rule this week is taking aim at products made with aluminum and steel. Basically, if something is imported into this country and contains steel or aluminum (or both), it’ll get the 50% tariff on those materials, and then whatever isn’t steel or aluminum will be hit with whatever tariff exists on that country. You know what kind of products use a lot of steel and aluminum? Car parts!
You can read the full decision here in the Federal Register, but unless you’re an expert in trade, I don’t think any of the hundreds of codes will mean anything to you. Thankfully, Reuters has a reasonable translation (bold mine):
Evercore ISI said in a research note the move covers more than 400 product codes representing over $200 billion in imports last year and estimates it will raise the overall effective tariff rate by around 1 percentage point.
The department is also adding imported parts for automotive exhaust systems and electrical steel needed for electric vehicles to the new tariffs as well as components for buses, air conditioners as well as appliances including refrigerators, freezers and dryers.
A group of foreign automakers had urged the department not to add the parts, saying the U.S. does not have the domestic capacity to handle current demand.
My understanding of how politics works in the 21st century is that people can endure wages that only slowly increase, employment that slowly decreases, and basically any other concern, so long as prices don’t go up. How does this decision not cause prices to eventually increase? In theory, companies in the United States are looking to restart or expand facilities to process these metals, but in practice, it’s a little bit of a harder proposition, according to this report from S&P Global Mobility:
Of the four active US smelters, two are operated by Alcoa and two by Chicago-based Century Aluminum. In earnings calls for their Q1, neither company said they would increase production and restart idled capacity because of US tariffs.
“It’s hard to make a restart decision based on a tariff that can change. We have seen the volatility of discussions around the tariffs over the last 60 days,” Oplinger said on Alcoa’s April 16 call. “We wouldn’t necessarily make a decision to restart capacity simply based on tariffs just because they can change.”
It doesn’t appear to be changing, so perhaps this will get companies on the long and expensive road to building more domestic capacity. That the ruling seems to particularly call out the parts necessary to make electric cars is not great for Tesla, but Tesla has bigger concerns.
Tesla Might Have To Answer For Its Big Autopilot Promises
There’s a sense that Elon Musk, by virtue of his money and power, is made of Teflon. Or maybe mithril, since he’s such a fan of sci-fi/fantasy. It’s clear that Musk views himself as some sort of protagonist in a Sci-Fi universe, even if he’s more of an L. Bob Rife-type figure to some.
Either way, his recent foray into expanding his power via politics has not gone well, and the hundreds of millions of dollars he’s spent to influence the election haven’t resulted in limitless control for Tesla. In addition to increased costs in the United States from tariffs, the company is facing a class action lawsuit over its Autopilot claims. Specifically, that customers paid for something that was never truly delivered.
The most important part of this ruling, I think, is not so much that it allows a class action lawsuit to proceed, but that it holds the company accountable for what CEO Elon Musk says and what it promised in blog posts. From U.S. District Judge Rita Lin, via Reuters:
In her decision on Monday, the San Francisco-based judge also said thousands of people likely saw Tesla’s claim in the “Autopilot” section of its website from October 2016 to August 2024 that its vehicles contained hardware for full self-driving.
Tesla made a similar claim in a blog post, newsletter and quarterly earnings call, as did Musk at a 2016 press conference.
“While these channels alone may not ordinarily be enough to establish class-wide exposure for a traditional car manufacturer, Tesla’s distinctive advertising strategy warrants a departure from the typical approach,” Lin wrote.Tesla does not use mass advertising or independent dealers, and Lin said it was reasonable to infer that class members interested in Full Self-Driving technology went to Tesla’s website to get information.
Musk and Tesla have a history of making big promises that take time to come to fruition (if they ever do). If other courts agree with this interpretation, then there may be more suits to come.
VinFast’s First Dealer Opens
I wrote earlier this month that VinFast is an automaker that is not keen on giving up, even if its attentions are maybe shifting a bit more towards Southeast Asia. While Tesla has found success outside of the dealership model, that hasn’t been the case for the Vietnamese carmaker, so it just opened its first dealer in California.
Vietnamese automaker VinFast opened its first franchised dealership in California, ending its direct-sales model in the state and the U.S. after struggling to sell its electric vehicles.
The VinFast San Diego store is part of Sunroad Automotive Group, which sells 14 brands at nine locations and has annual sales of 30,000 vehicles, VinFast said Aug. 19.
VinFast opened distribution to franchised dealers in late 2023 but kept its 15 California direct-sales showrooms. VinFast said April 24 it would close those stores and seek dealer partners.
“We believe in VinFast’s strong potential to make a lasting impact in the North American market,” Uri Feldman, president of Sunroad Holding Corp., said in a statement.
If California decides to replace the $7,500 tax credit with its own, this may not be the worst idea.
The Internet Can Be A Strange Place
I had a great time at Car Week, and I feel renewed seeing so many young enthusiasts. At the same time, it made me realize how far removed reality is from the mechanics of the Internet. There is something fundamentally broken in the way people interact with websites. Layoffs abound in the media space, and everything feels like a dumb game.
In theory, this article from Automotive News is about how companies like Cars.com and CarGurus aren’t threatened by Amazon’s new foray into used cars, but something else caught my eye:
Vetter said dealership feedback from Cars.com suggests Amazon isn’t having much of an impact anyway.
“I have talked to a lot of the dealers … and the feedback thus far has been — there’s a lot of effort but not a lot of traction,” Vetter said.
Vetter said Amazon could make a bigger impact by partnering with Cars Commerce.
“I’d love to be a reseller of Amazon solutions to the industry and ship dollars away from Google, right? We’ve got the distribution already built,” Vetter said. “If Amazon’s serious about wanting to sell advertising into the automotive industry, I think we’re an established platform that could provide a lot of scale and help on that, just like we’ve helped dealers with Google … or buying traffic on Facebook using our first-party data.”
That’s Cars Commerce (Cars.com) CEO Alex Vetter saying the quiet part out loud.
If you’re not aware, the fundamental promise of free information being supported by advertising doesn’t really work anymore. Most of the sites you read are playing some sort of game to trick the system so it can filter more eyeballs through as many revenue sources as possible.
What I think he’s saying here is that he’d like to partner with Amazon to use their “solutions” and products to take money away from the Google ecosystem. He also admits to “buying traffic” on Facebook, which isn’t wrong in and of itself, nor is using “first party data,” which is the information you give websites when you go to them.
It’s all an arbitrage, really, and all “free” content is just a slippery slide trying to land you in the funnel for some sort of commerce. This is why we’re trying to build a membership business as fast as we can, because none of this feels sustainable. If you feel the same way, please consider becoming a member.
What I’m Listening To While Writing TMD
I lied, the song of summer is “Golden” from the Netflix show KPop Demon Hunters. I will not explain, and if you have a kid I don’t need to explain.
The Big Question
What do you read on the Internet? Where do you shop for cars?
Top Photo: Flowmaster
The post Why Aftermarket Exhausts And Electric Cars Could Get Way More Expensive appeared first on The Autopian.
