L.A. Auto Show: The Eve of Destruction

The automotive industry is like catnip for American politicians. The billions of dollars in economic activity. The battles with unions. The millions of people employed by car makers, sellers, renters, repairers, financers, and insurers. It's irresistible.

For the car makers themselves, it's miserable. Every four years, the new American president rounds up the car making CEOs as a backdrop for dramatic announcements intended to define policy priorities for the next four years usually guaranteed to unleash heartburn in C-suites.

Eight years ago, President Trump brought together General Motors CEO Mary Barra, Fiat Chrysler CEO Sergio Marchionne, and Ford Motor Company CEO Mark Fields on January 24th, 2017, under the banner of America First with the objective of adding "jobs and production in exchange for more favorable regulations and tax policies," in the words of The New York Times. The NYTimes noted that the industry had a record year in 2016, selling 17.5M vehicles, and also pointed out the absence in the meeting of import manufacturers representing 40% of domestic vehicle production.

Marchionne would pass away in July of 2018 due to complications from surgery and after resigning his positions at Fiat Chrysler, now part of Stellantis. Fields retired from Ford in May of 2017. Mary Barra would go on to be the longest and still-serving CEO of GM. The industry would continue to throw off profits for all three companies but at lower sales volumes and with the growing cloud of a sluggish transition to electrification.

Four years later, President Biden brought together the leaders of the same three auto makers, adding a representative from the United Auto Workers union. Biden's banner was Build Back Better with an extensive list of policy objectives and detailed legislation. While Biden was successful in pushing through his policy and legislative agenda, the event was mainly remembered for the omission of Tesla and its CEO Elon Musk. This ominous omission might be reasonably considered a fateful choice for future Democratic party prospects.

We now stand on the eve of the L.A. Auto Show, the last major public auto exhibition before the Trump Administration takes the reins. A shadow of uncertainty looms over the event with word spreading of the Trump Administration's intentions to eliminate the $7,500 tax credit for EVs and impose severe tariffs on imported vehicles.

The latest edition of Automotive News captures the mood: "The 2024 Los Angeles Auto Show is the latest example of automakers’ dimming interest in using the once highly regarded venue of public exhibitions to introduce new vehicles. Auto shows still offer value as pressure-free ways for consumers to see what’s in the market, but the costly press conferences preceding the public opening bring less in terms of a first glimpse of anything new."

Columnist Larry Vellequette highlighted the quite obvious reality of increasingly expensive cars noting the average price of a new car at well over $50,000, the disappearance of the sub-$20,000 car (and almost universal exit from the sedan market by the big three) and the narrowing range of cars (mainly available from Toyota) still available for less than $30,000. Writes Vellequette: "Even in the immediate aftermath of a hard-fought and contentious political battle, you can see the dust clouds rising as the next conflict approaches, when all that anti-China rhetoric squares off with consumers looking helplessly for affordable vehicles, and wondering who’s to blame."

On the eve of the L.A. Auto Show the plea from the Zero Emission Transportation Association was for the incoming Administration to preserve the $7,500 tax credit in the interest of supporting domestic production of electric vehicles and electric batteries. Ironically, protectionist elements in the Republican party have been working vigorously to oppose domestic battery manufacturing - Governor Youngkin in Virginia opposing Ford's efforts to build a battery plant with CATL in the state; and right wing activists in Michigan fighting Gotion's plans to build a plant in that state.

Opposition to the $7,500 tax credit is certainly conflicted. The main beneficiaries of the credit are automobile dealers who typically pocket that money. Those same dealers were major contributors to the Trump campaign. (The situation is not unlike the solar installer who similarly works the financing in such a way that government incentives seem to have simply inflated the cost of the installation.)

I am headed to the L.A. Auto Show for both professional and sentimental reasons. I can't get over the feeling that collectively the industry is a deer in President Trump's headlights. We saw what happened to that deer in a recently shared video when confronted with a Tesla operating in FSD. Let's hope for a better outcome this week and for the next four years.