| Thanks for reading Hyperdrive, Bloomberg’s newsletter on the future of the auto world. Tariffs Expose Automotive Asymmetry | The confusion around President Donald Trump’s auto tariffs is giving many car executives déjà vu of pandemic times — when plant shutdowns and supply snarls limited production, leading to a run-up in car prices and bumper profits for manufacturers. While tumult reigned then and is predominating again, chaos may be where this comparison ends. This time around, carmakers will have limited room to pass hefty tariffs on to consumers by raising prices, according to J.D. Power. In this new protectionist landscape, brands with bloated inventory, US factories and local supply chains have a cost advantage over rivals, and competition between companies in this position may suppress price hikes. “When everyone was in Covid together, no one was able to really stay above the fray. Now, this is hitting, and it’s not evenly distributed,” Tyson Jominy, vice president of data and analytics for J.D. Power, told me. “The auto industry is uniquely positioned to be unable to pass through tariffs, certainly at this point in time.”  Vehicles lined up this month at a Ford dealership in Richmond, California. Photographer: David Paul Morris/Bloomberg As anyone trying to divine US trade policy right now will tell you, the situation is fluid — the actual tariff cost on any given vehicle is still up in the air. The Trump administration is considering dialing back some of the duties, including possibly granting relief on car parts crossing borders within North America, my colleagues reported this week. That exemption would be a huge coup for the industry. But even if the president does grant it, there’s been no indication that Trump’s 25% tariff on imported cars is going anywhere, and many automakers are planning to shift production to the US to avoid this levy. Of course, new auto plants don’t spring up overnight. In the interim, the US car market may be entering a strange new paradigm — one where inventory and supply chains are more determinative in winning market share, and where some struggling brands could find themselves favorably positioned. Consider Nissan. The Japanese automaker is on its third CEO since former Chairman Carlos Ghosn was ousted, an attempt to merge with Honda fell apart early this year, and US sales are down about 40% since 2018. Nissan had about 20 days’ supply of vehicles more than the industry average last month, according to Cox Automotive. But Christian Meunier, who took over as chairman of Nissan Americas in January, smells opportunity. He’s been war-gaming with his team on a pricing playbook for when the industry’s existing inventory of pre-tariff cars runs out in June, he told me last week at the New York auto show. When that happens, all the underutilized capacity at Nissan’s vehicle and engine plants in Tennessee and Mississippi will flip from anchor to asset — the company will be able to crank out more US-made SUVs and trucks quicker than competitors that will need time to stand up new assembly lines. “We’re going to change the dynamics of the US with the tariffs,” Meunier said in an interview. “We’re going to sell more Rogue, build more Rogue, build more Pathfinder, Murano and Frontier, and by doing this, we’re going to get a better utilization rate of our plants, and the cost down. And we’re going to make our suppliers more happy than they were, because we were dropping the volume all the time.”  A Nissan Frontier pickup truck at the 2024 New York International Auto Show. Photographer: Gabby Jones/Bloomberg One concrete example: Nissan’s Frontier pickup, which is assembled in Mississippi and powered by an engine made in Tennessee, competes with the Toyota Tacoma, which is assembled in Mexico. If Toyota wanted to pass on the cost of tariffs to Tacoma buyers, it risks being undercut on price by Nissan, whose Frontiers face a lower tariff bill. When I asked Toyota about this prospect, a spokesman noted that the automaker has invested about $50 billion in its US operations, which include 10 manufacturing plants. Toyota “will continue to deepen our investments in America,” the company said. Meunier already cut prices on its popular Rogue and Pathfinder SUVs earlier this month in a bid to increase sales, and Nissan is planning to move more Rogue production to the US from Japan, he said. Nissan executives aren’t the only ones thinking this way. Tariffs have prompted Hyundai to accelerate plans to localize more production and suppliers in the US. In the meantime, any tariff costs passed on to consumers will be gradual, and concentrated on higher-end models, CEO José Muñoz told Bloomberg last week. “Our business is not a business where you can say, ‘OK, this is my cost, my cost increased by 10%, I increased prices by 10%,’” Muñoz said. “You could do that, but typically then you will lose a lot in the market.”  Hyundai CEO José Muñoz speaking at the Semafor World Economy Summit on Thursday in Washington. Photographer: Kent Nishimura/Bloomberg Muñoz said Hyundai won’t exit entry-level segments where margins are thin and vehicles are subject to higher tariffs because they’re made outside the US — something J.D. Power has cautioned could happen with automakers who aren’t able to swallow tariff costs. Holding firm may be easier for Hyundai, the world’s third-biggest carmaker by sales, because it’s part of a larger conglomerate that includes parts suppliers and steel, construction, and finance businesses. Kjell Gruner, CEO of Volkswagen Group of America, also sees some light amid the fog of trade war. Gruner was in New York last week to show off the latest Tiguan SUV, with a more luxe trim and turbo engine. Unfortunately for VW, the Tiguan is made in Mexico, though Gruner indicated the company is willing to eat the incremental cost of tariffs at least in the short term. VW also has an assembly plant in Tennessee that makes its top-selling Atlas SUV and the electric ID.4. The vehicles still have significant tariff exposure because they source parts from around the world, Gruner said, but having a US factory gives him some cards to play against VW’s foes. “The question is, what does their value chain look like in these segments? We’re doing that and looking at the competition,” he said. “Then you do scenario planning, and game-playing who’s going to do what and what’s the likelihood.”  A Volkswagen Tiguan SEL R-Line Turbo SUV at the 2025 New York International Auto Show. Photographer: Bing Guan/Bloomberg Eating incremental cost is not a sustainable long-term strategy, and some automakers have indicated they’re going to raise prices if levies remain in place after pre-tariff inventory runs out. Ford sent a memo to dealers last week warning that it may do so as soon as next month if Trump doesn’t come through with tariff relief. There’s also risk to playing offense. Nissan could crank up production only to find that the president’s chaotic approach to trade policy drives up inflation or sparks a recession. But people who sell cars for a living are optimistic by nature, and they tend to emphasize opportunity more so than risk. Many executives expressed confidence that the current tariff regime will be temporary, and they see production moves as bargaining chips. The president “is going to land the plane very well, people will be very happy,” said Bernie Moreno, the car retailer-turned-US Senator who was in New York last week selling dealers on Trump’s tariff agenda. “The president has always said he’s open to conversations,” Moreno told me, when I asked about the chance of tariff relief on car parts. “If there’s a compelling reason to consider something different than what he’s thinking, he’s open to it, which is great. He’s very open-minded.”  Akio Toyoda speaking at CES in January. Photographer: Bridget Bennett/Bloomberg Toyota Chairman Akio Toyoda has proposed a buyout of Toyota Industries, people familiar with the matter said, seeking to consolidate his grip on Japan’s biggest business empire as a wave of M&A activity roils the nation. The proposal values Toyota Industries, which makes looms for textile manufacturing as well as parts for Toyota cars, at ¥6 trillion ($42 billion), one of the people said, a premium of 40% over its closing stock price on Friday. The company founded by Toyoda’s great-grandfather Sakichi has formed a special committee after receiving the proposal and hired advisers to review its viability, the people said, asking not to be identified because the information isn’t public.  The Lotus Theory 1 concept electric vehicle at the Shanghai auto show. Photographer: Qilai Shen/Bloomberg Now that the media days are over for the Shanghai auto show, have a look at Bloomberg’s rundown of which cars wowed attendees. Read More: | 
