Welcome to Tariff Tuesday, the day when Trump’s tariffs are slated to go into effect—except, as per the recent trend in U.S. politics, there are a couple of last-minute wrenches thrown into the mix. The tariffs are now delayed, meaning that the North American auto industry is shielded from feeling the pain for another month (well, mostly).
Welcome back to Critical Materials, your daily roundup for all things electric and automotive tech. Today, we’re scribing about Trump’s tariff war being (mostly) averted for another month, Scout’s latest scuffle with Volkswagen dealers, and Californians voting out Tesla with their wallets. Let’s jump in.
30%: Cars Are (Mostly) Safe From Trump’s Tariff War—For Now
Photo by: InsideEVs
Is anyone else clenching their wallet a bit tighter after this weekend? The industry is buzzing with just how hard U.S. President Donald Trump’s trade war could hit consumers across North America, including those in Mexico and Canada, especially as the Great White North prepares to hit back with tariffs of their own. But let’s take a breath, now, because it seems like the auto industry is stable for another month as the U.S. reaches a temporary trade war pause with both countries.
Late Monday afternoon Canadian Prime Minister Justin Trudeau announced that Canada had reached an agreement with the U.S. to defer the increase in tariffs with just hours left before both countries went live with import levies on Tuesday. Trudeau’s decree trailed behind Trump’s public disclosure that the U.S. and Mexico had reached an agreement for a temporary pause.
The cost? Border security. Canada pledged to spend $1.3 billion to beef up security at its border with helicopters, plus more technology and personnel. Mexico said it would immediately send 10,000 troops to the U.S. border to help prevent drug trafficking. Both countries will revisit the tariffs with the U.S. in 30 days and enter into negotiations in the interim.
It would appear that the 10% tariff hike on China and the elimination of the de minimis threshold, however, will go into play as-is.
The good news is that vehicle costs won’t skyrocket overnight, at least not as much as anticipated until the 30-day extension expires. Mexico’s National Auto Parts Industry Association warned on Monday that the bottom line of new car purchases could be inflated by around $3,000 if all goes down as originally planned. Analysts estimate that it’s more of a range, meaning some models could go up in price by just $1,000 while others could see surges of more than $9,000 or more.
The bad news is that automakers still source parts from China.
This means the U.S. auto industry won’t be completely free from tariff hell. Models underpinned by components sourced from China will see an increase in component cost, which, while not quite 25%, will surely be passed onto the consumer in one way or another for automakers to digest the impact on their bottom line.
Likely, it’s not going to be something we see overnight. Michael Hicks, an economist and professor at Ball State University in Muncie, Indiana who studied the impact of Trump’s tariffs during his first term in office, told the Detroit Free Press that it took around six months for the U.S. to feel any economic impact—and that started just before the global Covid-19 pandemic as manufacturing jobs came to an abrupt stalemate.
North America’s auto industry cut it close to a disastrous 2025 thanks to tariffs. It now has a full month before the clock ticks back to midnight, but at the rate that U.S. politics are going today, who knows what we can expect in March?
60%: Dealers Are Still Nipping At Scout’s Heels Over Direct-To-Consumer Sales
Photo by: Scout Motors
Rebirthed Americana automaker Scout hasn’t even rolled a single production vehicle off the line and it has somehow become one of the biggest thorns in the Volkswagen dealership network’s side. That is, of course, because the brand wants absolutely nothing to do with dealer sales despite being a spin-off under the Volkswagen parent company.
See, Scout is a big proponent of modernizing the car-buying experience. That means selling vehicles directly to consumers in a more friendly way—think Tesla, Rivian, or just about any direct-to-consumer EV upstart of the last decade. But a group of Volkswagen and Audi dealers in Florida want in on the profits and, according to Automotive News, have filed suit against the automaker to prevent it from doing exactly that.
I know what you’re thinking: this sounds familiar. It should, because this lawsuit isn’t the only legal action against Scout riled up by the same topic of direct-to-consumer sales.
Scout recently received a separate cease and desist letter from the California New Car Dealers Association. That letter claimed that existing Volkswagen franchise agreements preempted any direct sales by the Scout brand. The marque then fired back against the association in a legal “Don’t tread on us” sort of way, explaining very clearly that Volkswagen is not, has not been, and will not be an authorized sales channel of Scout Motors.
The brand insists that despite being a Volkswagen Group creation, it’s independent. Where things get messy is what states consider to be independent—and in Florida’s case, that boils down to ownership stake.
VW has a 30% stake in Scout. That’s right on the line of what Florida considers a “common entity.” That definition comes from the Florida Automobile Dealers Act, a law that went into effect in 2023 after the Florida Automobile Dealers Association lobbied in favor of it. According to FMVDA, common entities are forbidden from competing directly with associated dealer networks. It’s kind of like a legal “gotcha!” targeted at brands like Volkswagen which spun off Scout, or Honda and Sony’s Afeela partnership.
Of course, Scout isn’t backing down from the fight. CEO Scott Keogh has made it crystal clear: there will be no dealerships. Its retro-rugged EVs will be sold directly to consumers and follow the same easy model that other EV brands have instilled—no haggling, no markups, and certainly no nitrogen-filled tires. And that’s that. The unknown is whether or not Scout can win the legal battle when the cards are officially stacked against it.
This new lawsuit isn’t just another spat between an automaker and a dealer network. It’s a sign that the industry is evolving beyond the antiquated dealership model—that brands no longer need that inflatable tube person to attract attention to a lot stuffed with an ocean of automotive inventory. The cold hard truth is that the dealership model is dying. Scout—and its sales model—is an existential threat to that paradigm. But the old-fashioned syndicate refuses to let it go without a grand battle, and as Scout gets closer to pumping out its first trucks, this lawsuit will likely be just the beginning of that war.
90%: Californians Are Voting Out Tesla
Photo by: Tesla
Tesla’s seemingly unshakable grip on California is slipping. Once home to the electric automaker, California is America’s keystone to the EV movement—it helped to fuel early adoption and is home to around 35% of all EVs registered in the U.S. according to the U.S. Department of Energy. But with Tesla’s name becoming more politically tied than ever before, new car buyers in the Golden State are turning their back on Tesla pretty darn quickly.
New data from the California New Car Dealers Association shows that Tesla’s footprint in the state is dropping. In fact, year-over-year, registrations of Teslas fell 12% overall and registrations of the Tesla Model 3, specifically, dropped by nearly 36%. According to Bloomberg, the reason behind the slippage is the public’s view of the company’s celebrity CEO: Elon Musk.
“[T]he company likely lost some business in California as a result of the active role Chief Executive Officer Elon Musk played in the US election,” wrote Bloomberg in its report. “Musk […] spent at least $288 million to help elect Donald Trump and other Republican candidates during the 2024 cycle.”
Despite this, Tesla still held the majority of ZEV registrations for 2024, though it did drop from 60.1% of all registrations to 52.5%. Competition from Honda and Hyundai were the largest winners from Tesla’s fall-off with each brand gobbling up a respective 1.8 and 1.5 percentage points of market share.
Musk has always been a polarizing figure, but his recent politically-fueled antics are like playing with fire. There is a reason why CEOs and other public figures often play politics behind the curtain, and Musk’s openness seems to be hitting Tesla right in the sales (though its stable stock price shows that sales may not matter much to investors, anyway). His personal brand is inexplicably intertwined with Tesla as a whole, which means that many folks who bought a Tesla for the progressive, eco-conscious company ethos may now have other thoughts. Even those who just bought the car because it’s a good EV may not want anything to do with a politicized car company anymore.
To reiterate: this isn’t a uniquely California problem. Another recent study by Electrifying revealed that 59% of survey respondents wrote off Tesla because of Elon Musk. And in the Netherlands, a separate study showed that three-in-10 Tesla owners were considering selling their Tesla because of the CEO. Then there’s France, the European Union’s second-largest EV market, which saw a 63% plunge in Tesla registrations last month.
Numbers don’t lie. A 12% drop—let alone a model-specific 36% slippage—in California’s market share isn’t just a fluke, it’s a red flag. Maybe that’s finally the market waking up to more competition, or maybe it’s Musk’s politics. Perhaps a bit of both. But it’s hard to deny that when a company stakes its reputation in lock-step with its CEO’s public image, that persona matters a lot.
100%: How Can New Brands Cut It Without Dealers?
Photo by: InsideEVs
I’ll admit that I’m not the biggest fan of the dealership model. I mean, who is, really? It’s almost a weekly thing where I hear a horror story from a friend, colleague, or reader that focuses on an experience at a dealer. But on the flip side, some of these EV brands aren’t exactly setting the bar high either.
For example, the Rivian R2 is likely going to be a giant leap forward for the brand—its Model Y moment, if you will. For those of you with preorders, how concerned are you that you’ll be able to get a service appointment locally and within a reasonable amount of time? The growing pains of the Rivian service experience are well documented across social media, and more cars likely won’t improve on that by itself. Then again, Tesla is still struggling with poor service complaints and the brand has been selling cars for almost two decades.
Yes, the pre-sales side of the dealer is an issue. Eliminating dealers will help to cut back on that (maybe), but the post-sale and service side of car buying seems to still be an issue.
So here’s where you come in. What are your thoughts on how direct sales without a dealer? Do you have concerns about newer brands like Rivian and the ability to independently grow a service network without the traditional dealer model? Let me know your thoughts in the comments.
