It’s Tariff Tuesday here in North America, and you know what that means: The auto industry is in full-on freak-out mode wondering what the heck it’s going to do with huge increases in component and vehicle prices on the horizon. And all of it will have a profound effect on the move toward electrification at a very difficult time.
Welcome back to Critical Materials, your daily roundup for all things electric and automotive tech. Today, the tariffs are here. Also, GM hires a Chief AI Officer, and Europe is backing down on its emissions targets. Let’s jump in.
30%: Here Come The Tariffs
Last month, both Canada and Mexico escaped temporarily unscathed as deals were struck up to delay threatened 25% tariffs for 30 days. Those 30 days are now up and U.S. President Donald Trump declared on the eve of the tariffs that there was no possible way out for either country. As for China, which had a blanket tariff of 10% thrown on imports to the U.S.? Well, China is getting another 10% hike right alongside Canada and Mexico.
To be clear, this isn’t just about a little extra cost at the border. Auto manufacturing is a global trade with supply chains stretching across the globe to make the wheels go ’round. These tariffs could grind auto production to a half, spark retaliatory trade wars, and send car prices soaring upwards of $10,000 per vehicle.
Despite months of warnings, if you think the automakers, suppliers or consumers were prepared for this, think again. Industry leaders are officially ringing alarm bells:
- Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, warned that auto production in Michigan and Ontario could drop to “pandemic-level idling” within a week.
- Brian Kingston, the CEO of the Canadian Vehicle Manufacturers’ Association, warned that Detroit’s big three (GM, Ford, Stellantis) may be forced to halt production completely until the tariffs are resolved or a workaround is found.
- David Adams, CEO of Global Automakers of Canada, warned that suppliers could run out of parts within days, reinforcing the likelihood of a production shutdown.
This isn’t a slow-moving crisis. Domestic and foreign automakers building cars in the U.S. operate on the premise of just-in-time manufacturing. This means that certain time-critical parts (both assembled and component-level) could cross international borders multiple times before the OEM takes possession of the final product to install in a vehicle. When those parts become unavailable or too expensive to source, the production line may shut down until a remedy is found.
So what does this mean for electric vehicles, or even hybrids? As the Detroit Free Press reports, “it is quite difficult for automakers and their suppliers to plan and adapt when things are this uncertain because decisions made today could be undercut in three to six months.” Planning for future technologies can feel impossible, especially if the U.S. cuts itself off from the rest of the world:
The companies can adapt and make minor changes to product plans if federal policies change, but halting the development of an all-new product with new technology that is already set in motion is difficult and costly, [manufacturing expert Laurie Harbour] said.
“The (automakers) have invested billions of dollars in R&D to develop new (electric vehicle) products because the administration back to Obama was pushing clean vehicles,” Harbour said. “Not to mention the rest of the world was pushing it.”
Since vehicles for global automakers are based on global platforms, the engineering was happening at a global level, Harbour said.
“As the administration changes and their agenda does not include clean vehicles, they have lifted these regulations,” Harbour said. “That said, the (automakers) continued their development because the globe was still focused on this direction.”
So while it’s hard to determine the exact impact on EVs in America, it’s safe to say it’s nothing good right now.
No country is taking this trade war lying down. Canada is prepared to “fight like hell,” according to Ontario Premier Doug Ford, threatening retaliatory tariffs and even cutting off electricity exports to the U.S., if necessary. China is preparing its own payback tariffs as well.
The North American auto industry was built on the premise of free trade. Now it’s being ripped apart overnight and the only certainty is straight-up chaos. Automakers have no choice but to brace for the impact, and whether they choose to temporarily absorb the increased costs or halt production altogether, consumers will soon feel the impact.
60%: GM Has Hired A Chief AI Officer Because Cars Are Computers, Too
GM has made it official: Artificial Intelligence isn’t just a buzzword at its company anymore, it’s a full-fledged executive position. This week, GM hired Barak Turovsky, former VP of AI at Cisco and director of Google’s Languages AI team, as its first-ever Chief AI Officer.
No, that title isn’t something straight out of Blade Runner (though it might be AI-generated), it’s an actual role at the automaker. GM looks to use Turovsky’s decades of machine-learning talent and leadership to figure out exactly how AI fits into the brand’s future. That includes everything from personal self-driving tech to customer service and even manufacturing.
Here’s what Turovsky had to say about accepting the position:
Now, hiring a Chief AI Officer might sound like a flashy PR move—and it might be—but that’s not the only reason GM is doing it. In fact, the brand has already been using AI behind the scenes in some serious ways.
One of those ways is on the assembly line. The brand can gauge Overall Equipment Effectiveness by using sensor data to determine if equipment on the line will fail. It also makes use of cameras to spot defects or quality issues on vehicles rolling off the line, just in case the human eye misses it.
It also employs AI to enhance its vehicle software. We’re not talking about replacing devs with intern-level ChatGPT code, but instead analyzing code to spot bugs in the more than 100 million lines of code found in the average vehicle. GM uses AI on the dealer side of the chain, too. The automaker says AI helps its franchises order inventory more efficiently and better predict which models and trims sell best in a dealer’s market.
And let’s not forget the obvious uses like vehicle autonomy, voice assistants and in-car generative AI features.
Turovsky’s hiring comes at a crucial moment for GM. The automaker has gone all-in on software—after all, if you ask the right people, the future of vehicles is software-defined, meaning that a car is just as much a computer as it is a mechanical machine. Every major automaker is investing big in software and AI right now, meaning that it’s not just a tech gimmick, but a core part of how next-generation smart factories will operate.
90%: Europe Will Give Automakers Flexibility On CO2 Targets
Photo by: Volvo
After shaking up automakers with strict emissions targets, the European Union says that it will now cut car manufacturers some slack on its strict emission enforcement set to take effect this year. Under the original plan, automakers were facing billions in fines should they miss emission targets. In a market where EV sales aren’t developing as quickly as some may have hoped, those fines could prove to be a very big deal.
Ursula von der Leyen, the European Commission President, said that the bloc would give some breathing room to automakers through a “targeted amendment” set to be published by the EU later this month.
The amendment looks to give automakers the flexibility to bank and borrow over the next three years. This means that if an automaker misses the target in its first year but over-performs in the next two years, it can apply the overage of credits to its shortcomings and effectively cancel out its fines.
Automakers previously worked to establish several pools in the EU to exchange clean credits for cash. This would allow non-compliant brands to work with EV makers like Tesla and BYD to purchase EV credits rather than pay the EU government fines. But as requirements ease up, these pools could see the value of the carbon credits fall given first-year compliance is no longer as urgent.
This has rightfully riled up companies that have overspent to ensure compliance by 2025. Volvo, for example, made “heavy investments” to be ready for the 2025 requirement. But with the ease of restrictions, CEO Jim Rowan says that the EU has effectively caused Volvo to be “disadvantaged” by applying last-minute changes to the regulations.
Meanwhile, companies like Volkswagen—which was poised to face nearly $1.6 billion in compliance penalties—welcome the change. But even those celebrating are already pushing for an even larger extension or claiming that the bank-and-borrow approach provides only limited relief to future fines.
The takeaway? Just about every side is torn on what to think. Some are celebrating, others are warning that it’s dulling Europe’s already-thin competitive edge to China’s EV market. Here’s a snippet showing just how polarizing opinions on Europe’s flexibility are, via Automotive News:
Environmental groups also criticized the additional flexibility, saying that it risked further undermining the competitiveness of European automakers during the transition.
The advocacy group Transport & Environment described the change as “an unprecedented gift to Europe’s car industry in the middle of a compliance year.”
“Weakening the EU clean car rules rewards laggards and does little for Europe’s car industry except to leave it further behind China,” T&E Executive Director William Todts said in an emailed statement.
“The EU risks creating very damaging uncertainty about the electric vehicle transition in Europe,” he added.
The European Commission is set to reveal its full plan on Wednesday. The relief still requires sign-off by bloc members, as well as the European Parliament, but if all goes as planned, Europe’s auto industry could breathe a sigh of relief knowing it won’t have to spend billions in compliance fees alone.
100%: Where Should Automakers Be Using AI?
Photo by: Hyundai
AI isn’t just some cliche in the tech world. Sure, it’s been a bit… overused in the past few years, but that doesn’t mean AI as a whole is a cash burn that some C-level executive is demanding a company invest in. The broad-reaching tech has some legitimate uses.
GM’s use of AI in quality control had me thinking about how much of a human process that can be. I picture folks with go-no-go gauges determining whether or not a panel gap is within spec, or looking for bad welds along a seam. These are tasks that could, in theory, be automated by AI.
So here’s the point where I ask you, dear reader, just where automakers should be investing the time and money into AI. Is it in quality control? Research? Better in-car voice assistants? Let me know your thoughts in the comments.
