Beyond Glits & Glam Of Auto Industry, Policy Scenario Will Shape Industry In 2018

After decline in sales in 2017, auto manufacturers are hopefully looking forward to turn things around in coming year. However, the clouds of policy reforms loom large over their heads.

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Beyond Glits & Glam Of Auto Industry, Policy Scenario Will Shape Industry In 2018
Policy Uncertainty Looms Over Auto Industry, Biggest Year To Emerge

Recently, new models were displayed at the Detroit auto show. But beyond these shining and fast cars, the question remained whether the industry will shine and move ahead rapidly in the U.S. in 2018. After continuous growth for past seven years, the auto sales in the country suffered a decline of two percent in 2017. Auto manufacturers are hopefully looking forward to turn things around in coming year, but the clouds of policy reforms loom large over their heads. From Trump’s threat to withdraw the U.S. from North American Free Trade Agreement (NAFTA) and reimplementation of vehicle efficiency rules to regulations easing up the way for autonomous cars, manufacturers need to reform their business models as new regulations and policies evolve.

Debbie Dingell, a Congresswoman, Michigan Democrat, and former General Motors Co. executive, said, “I think this is going to be the most important public policy year since 2008 (for the auto industry.”

Auto manufacturers have sensed a lot of uncertainties in year to come. Though policy reforms will play a significant part in their businesses, they need to focus on maintaining sales and make profits to make their mark in the industry. The recently enabled tax cut, which reduced rate of U.S. corporate tax from 35 to 21 percent would help the industry grow. Some analysts opined that this reduction would enhance sales. Furthermore, the ongoing negotiations and reiteration by Trump to withdraw the country from NAFTA would make a significant impact.

The Trump administration proposed changes in the NAFTA’s rules to escalate jobs in the U.S. auto industry. Canada and Mexico supported the proposal due to concerns over withdrawal. However, withdrawal would also affect the U.S. vehicle export limits as 14 manufacturing plants were built in the country after the agreement.

Joe Hinrichs, President of Global Operations for Ford, expressed optimism about settlement of disputes and outlined the belief in free and fair trade. He said, “We do support the modernization of NAFTA. We have had conversations with the administration. We believe that North America needs to be competitive globally and NAFTA is a big part of that. We are a part of those conversations, hopefully we see a resolution that will work for all three countries.”

The interruption in the flow and introduction of barriers would affect the auto industry. The export prices would increase and countries such as Russia would prefer China to import cars.

The U.S. regulators also need to pay attention on reforming vehicle efficiency rules to promote cleaner vehicles. The reformation may alter efficiency targets. However, some executives of major auto manufacturers expect relaxation in standards. Car and light truck fuel economy standards will be reviewed by the National Highway Traffic Safety Administration by March 30. States following the clean air rules of California stated that they would sue to counter rollback of new standards if need arises.

The self-driving vehicle industry has been booming across the world and every major manufacturer announced their manufacturing plans and targets for the future. The self-driving vehicle bill is resting in the house after opposition rejected it in December 2017. The bill would establish regulatory framework and enable companies to work on the technology by abiding to the safety rules until formal rules are implemented.

Gary Peters, Michigan Senator, a Democrat, and co-author of the Senate’s bill, outlined in an interview that the bill is a boon for road safety and a “moonshot for artificial intelligence” which will empower autonomous cars.

The future of the industry depends largely on the happening in the regulatory scenario in the U.S. and despite roadblocks, manufacturers need to find way to achieve sales targets and gain profitability.

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