TICK, TICK, TICK.

Editor's Note: This week, Peter takes on tariffs and the damage they are poised to unleash on an already faltering industry. In On The Table, we preview a co-branded ad between VW and NBCUniversal that celebrates the 50th anniversary of Saturday Night Live (SNL50). We also have the details about five new production car lap records set by the Corvette ZR1 during a U.S. track tour. And we look at the official pricing for one of Peter's all-time favorite cars, the refreshed 2025 VW Golf GTI and Golf R. Our AE Song of the Week is "Strange Magic" by Electric Light Orchestra. In Fumes, we have the next installment of Peter's much-lauded new series, "The V8 Era," recalling how the emergence of V8 power transformed American sports car racing and propelled it into an entirely new dimension of popularity. And in The Line, we'll have the results from the Daytona 500. Enjoy! -WG


By Peter M. DeLorenzo

 

Detroit. Now that this industry is being immersed in chaos theory, where it’s tariffs one day and a reprise the next, it’s clear that the clock is ticking on the very existence of the auto business in this country, for every manufacturer.

 

The very idea that trade agreements between the U.S., Canada and Mexico could be arbitrarily blown up on a capricious whim and a blind belief that it will somehow just workout to be better in the end isn’t only stupid, it’s sad and pathetic.

 

In addition, Volkswagen, Mercedes-Benz, Hyundai-Kia and BMW will be the most exposed if tariffs are slapped on imports by the U.S., but all of the manufacturers are vulnerable and all of them will suffer.

 

Now, are some tariffs necessary? Yes, the situation with Chinese manufacturers is a completely separate deal. Canada putting a 100 percent tariff on Chinese-sourced cars is absolutely the right call, because let’s face it, if the Chinese manufacturers are allowed to “dump” their BEVs in North America unfettered, it will spell the end of U.S.-based automakers as we know them, except for a very limited range of truck and SUV offerings.

 

Some of the less-informed out there would argue, who cares? The U.S. industry deserves to go down. Really? That’s the hill you’re going to die on? All I can say is be careful what you wish for, because this country can’t survive being a junk “economy” based on Starbucks’ consumption, TikTok and upgrading imported cell phones. Without a solid manufacturing base, this country becomes beholden to the rest of the world for everything.

 

But beyond that dire warning, who will suffer the most by these arbitrary tariffs being applied by our esteemed, certified hacks in Washington? And by the way, let’s not forget that the attitude emanating from our nation’s capital is that there will be “some short-term pain” involved. Really? Cue Johnny Carson: “I did not know that.” And who will have to endure this “short-term pain”? Yes, you guessed it, everyday car-buying consumers like you and me, from those of us who need basic transportation, to even those with the disposable income to spend more. We all lose in this deal.

 

Remember, these tariffs are being planned for an industry that is already awash in overpriced cars and trucks. Yes, these manufacturers are ultimately responsible – along with government safety, emissions and “nanny” mandates, of course – for the runaway costs on new vehicles as it stands today. Take, for instance, the marketing geniuses out in Auburn Hills, who kept slapping price increases on Jeeps for six years straight, thinking it would never catch up with them. Well, guess what? It did, big time. Jeep sales plummeted, and the Jeep marketers kept scratching their heads while wondering, “Why?” Brilliant. Not. And now, lo and behold, 2025 Jeeps cost nine-percent less than 2024. Will that be enough to jump-start the brand? It’s a giant “we’ll see” as we like to say around here.

 

I’ve been writing columns for years now focusing on the cost crisis affecting new vehicles in this market. $50,000 is the average transaction price right now. (Yes, we know, some analysts are insisting it’s “only” around $48,000. Really? Does it matter? -WG)

 

I keep waiting for a manufacturer to deliver a brand-new vehicle in the low-$20,000 range, a vehicle that people would actually want. Rumors out of Germany suggest that VW has something like that on the drawing board – an EV, of course – but it will probably never see the light of day. Why? VW imports 80 percent of its vehicles to the U.S. If the tariffs hit and hold, VW would likely not survive here in its present form. So, any idea that it would bring a price-leader vehicle like that here is pure folly.

 

I’m still holding out hope for the next-generation Chevrolet Bolt, but it won’t be in the low-$20,000 price range, that has already been determined. GM not only needs to deliver a superb vehicle – the previous generation actually was, I had one and it performed beautifully – it needs to deliver a vehicle that undercuts the cost to the consumer of the previous Bolt, while being a considerably better car.

 

This will require what I call a “Lexus intro strategy,” which, as a reminder, was when Toyota operatives purposely took a loss on each vehicle – rumors suggest it was $15k per car – sold here to “seed” the Lexus as a true luxury brand in this market. How did that go for Toyota? It proved to be an outstanding strategy, just look at where Lexus is now.

 

I will admit that this strategy is anathema to GM marketers, because it doesn’t jibe with the company’s “M.O.” in the least. GM’s army of cost analysts are not going to take a “loss” on each vehicle sold on purpose unless they’re ordered to do so. But that’s exactly what needs to happen with the next-generation Bolt, due sometime late next year.

 

I’ve used the term "Swirling Maelstrom" to define this business for years now. Some have taken umbrage with me using this term, suggesting it was a gross exaggeration. Really? Because right now the "Swirling Maelstrom" is exactly what’s roiling this business right now. It is going flat-out, in fact.

This business is buried in Crazy Town at the moment, and as I said last week, unfortunately, nobody knows anything. Nothing can be counted on – not the blatant hacks in Washington, not the stability of the economy, the interest rates or consumers' fundamental interest in shopping for a car.

The only thing that actually can be counted on? Inflation will get worse, because that’s what happens with tariffs, guaranteed.

 

The harsh reality? The clock is ticking on this industry as we know it. 

And that’s the High-Octane Truth for this week.

 

 

Editor's Note: Click on "Next 1 Entries" at the bottom of this page to see previous issues. - WG