To our American readers: Welcome to a new week. You officially have a new president, and he’s promised a lot of change over the next four years. Many of his policies target the U.S. auto industry, which is now sweating over the sheer uncertainty that President Donald Trump’s plan for tariffs could have on its bottom line—and the average consumer’s wallet.
Welcome back to Critical Materials, your daily roundup for all things electric and automotive tech. Today, we’re chatting about the potential effect Trump’s tariffs could have on the North American auto industry, plus, Scout issues a stern warning to Volkswagen dealers looking to get in on its sales, and Rivian’s partnership with the Germans could get even tighter. Let’s jump in.
30%: GM’s Canadian Leadership Sounds The Alarm On Trump’s Tariffs
Photo by: Chevrolet
Well, folks, it’s official—Donald Trump has been sworn in as President of the United States once again. In this new era of Trump, the auto industry is bracing for tariffs promised to be imposed on two of America’s closest trading partners: Canada and Mexico.
With post-inauguration day reality finally setting in, the head of General Motors’ Canada division is now sounding the alarm. If Trump follows through with his plan to push forward with tariffs, decades of progress could be unraveled from the delicate North American auto industry supply chain, causing vehicle prices to spike. And that means the consumer will ultimately be the one who suffers.
“It is a disruption that is in no one’s interest, especially in the U.S.,” warned GM Canada President Kristian Aquilina during an interview with Bloomberg.
Aquilina’s caution is one echoed by Canadian officials who have threatened retaliatory tariffs on the U.S. should the president push forward with his threats of duty fees of up to 25% for Canada and Mexico. And should any of those retaliatory tariffs be aimed at cars and trucks, well, it could spell disaster for any vehicle assembled in the U.S., regardless of brand.
This should strike up warning signs for manufacturers who set up shop domestically during the Biden administration in order to ensure that upcoming models can qualify for the EV tax credit, something which Trump also threatened to repeal when he took office. But don’t forget about the countless other foreign and domestic manufacturers who produce legacy gas-powered cars in the States, either.
Many of these brands also have factories in Canada and Mexico which build components, powertrains, or entire vehicles that are then imported into the U.S. This could mean tariffs going in and tariffs coming out. And, again, a higher price tag on a vehicle’s Monroney sticker.
It’s not just the U.S. that could face higher vehicle prices, either. If a vehicle is assembled in the U.S. and exported to other markets (like 60% of the SUVs produced by BMW in South Carolina), it could ultimately be more expensive due to tariffs imposed on imported goods. Canadian residents in particular will also be affected, as an estimated 50% of the vehicles sold in Canada in 2023 were imported from the U.S.
During his inaugural address, Trump said that the U.S. would collect “massive amounts” of income specifically from foreign trade through a new agency he would like to have created called the “External Revenue Service”—meaning that the federal government would collect taxes by imposing tariffs on goods flowing in and out of the U.S.
No tariff reform was signed into office through executive order on Trump’s first day, but reports from Reuters and other news agencies signal that the President will direct federal agencies to evaluate trade relationships with Canada, Mexico and China in February.
60%: Scout Warns VW Dealers: Don’t Tread On Us
Photo by: Scout Motors
If you thought Scout was all retro-rugged vibes and Southern charm, think again. It turns out that the brand has grown some sharp teeth before a vehicle has even hit the streets. After being hit with a case and desist letter from Volkswagen’s U.S. dealers, Scout is metaphorically waving the Gadsden flag in a clear response to dealers throwing a tantrum over the brand’s direct sales model.
See, CEO Scott Keogh has explained to Volkswagen’s dealers time and time again: Scout Motors is not interested in the dealership model. No franchises, no up-selling nitrogen-filled tires, and certainly no dealer markup. The resurrected brand isn’t here to play by the old rules and its direct-to-consumer sales model is going to be what modernizes the brand along with other EV upstarts like Tesla and Rivian.
The direct sales approach in particular has VW dealers feeling some type of way—perhaps even threatened amid a seismic shift in the industry. That’s why the National Auto Dealers Association even called the plan “salt in the wound” last year.
Keogh has remained steadfast, though. And that has forced Volkswagen’s dealers to take every angle they can in order to maximize their chance at getting a piece of the Scout pie.
First noticed by our friends over at The Drive, Scout’s double-down on doing its own thing came in the form of a “gotcha!” letter drafted by its lawyers as a response to a cease and desist letter drafted by the California New Car Dealers Association (CNCDA). The claim is that Scout’s direct-to-consumer sales model directly competes with current dealerships that operate under the existing Volkswagen franchise agreement.
There’s just one problem: Scout Motors isn’t Volkswagen. That’s the argument being made by Scout’s lawyers, anyway:
“[Volkswagen Group of America] is not authorized by Scout Motors to sell, and will not be selling or distributing, Scout-branded EVs in California or any other state. Scout Motors and the Scout brand exist and operate independently of VWGoA and its brands such as Volkswagen and Audi. They will continue to do so in the future,” writes Scout Motors’ general counsel, Neil Sitron, in a strongly worded response to the CNCDA. He later continues:
“Volkswagen-brand dealers have no right to Scout-branded vehicles, nor do any other franchised dealers.”
Scout’s showdown with VW’s dealer network is bigger than just one brand fighting the old guard. It’s about the future of car sales, the continued growing pains of EV adoption, and forcing the auto industry to get with the times. For now, one thing is abundantly clear: Scout isn’t here to play by the old rules, and it won’t be bullied into submission.
90%: VW CEO Hints At Potential Expanded Rivian Partnership
Photo by: InsideEVs
Hot on the heels of a nearly $6 billion deal between the two brands, Volkswagen CEO Oliver Blume hints that its partnership with Rivian could be just the tip of the iceberg.
In an interview with German news outlet Der Spiegel, Blume mentioned that Volkswagen is considering expanding the partnership. The specifics are still being discussed, but Blume did mention the potential for hardware sharing and volume purchasing opportunities—which could mean lower costs for both brands enabled by the Software-Defined Vehicle platforms that VW will rely on the partnership for.
“We are thinking about sharing modules and bundling purchasing volumes,” said Blume in an interview with Spiegel. “The Volkswagen Group offers great opportunities for a small brand like Rivian.”
To Blume’s point, Rivian is still truly a small brand. Last year it delivered 51,579 vehicles in 2024—13,423 of which were its commercial EDVs (like the ones used by Amazon). Volkswagen delivered more than 9 million cars worldwide, 744,800 of which were EVs. When it comes to volume pricing, it would seem that Rivian could greatly benefit from the volume in which VW purchases certain components for its vehicles. And with the cheaper R2 and R3 platforms due out very soon, penny-pinching could be what truly shaves down the cost of these platforms and makes Rivian reach a profit sooner.
The partnership between the two companies (officially branded Rivian and VW Group Technology, LLC—catchy, I know), is focused on building the software in modern Software-Defined Vehicles. It specifically allows both brands to share the development costs of more robust zonal architecture tech already championed by Rivian. For Volkswagen, the biggest advantage is actually utilizing a software platform other than the money-bleeding headache that is CARIAD. This would allow the Germans to go from using more than 100 different control units in its modern vehicles to just seven—the same amount used by Rivian’s zonal stack today.
Obviously, cutting costs is the main target here. And if VW can do that with software while also shaving a few cents per part off for hardware, it could make sense to dig in even deeper. Volkswagen needs a win in America, and Scout’s independence means that it isn’t going to be the group’s magic ticket—but perhaps Rivian and VW can share some success where they both can use it most.
100%: What’s The Vibe On Direct To Consumer Sales?
Yeah, yeah—we’ve all jokingly called it the “stealership.” Decades of this model led to consumers distrusting the franchised dealer blueprint, leading companies like CarMax, Carvana, and Vroom to pick up the slack with more high-tech ways to sell you a used car.
And now most modern startups are happy to sell you a car directly and cut the dealer out of the equation—well, as long as franchise laws haven’t made it illegal to do so without a dealership, that is.
How do you feel about dealerships versus direct-to-consumer car sales? Are dealers a necessary evil, or just another step in the buying process that can be cut out? Does this change when it comes to servicing your car? Let me know your thoughts in the comments.
