I would like to offer two additional thoughts about Paul Niedermeyer’s (2024) recent article that discusses the auto industry abandoning low-priced cars in the U.S. market.
First, the election of Donald Trump as president increases the auto industry’s vulnerability to a market shift away from the more expensive cars and trucks that virtually all automakers have been emphasizing.
The Trump campaign has promised aggressive actions on three fronts that could be highly disruptive to the economy: A broad range of tariffs, massive deportations and deep federal budget cuts.
“Two main pillars of his policy proposals, tariffs and mass deportations, are likely to cause prices to rise as they will make it more difficult for businesses to produce goods,” Jacob Channel, chief economist at LendingTree, told CBS Money Watch (Picchi, 2024).
Meanwhile, Elon Musk — who Trump said he would appoint to lead a government “efficiency” commission — has acknowledged that his call for cutting the federal budget by a third could severely impact financial markets (Romm, 2024).
Also see ‘Automotive News tiptoes around a potentially huge conflict of interest’
Of course, it is unclear to what degree Trump’s campaign rhetoric will translate into promised policy changes. Some of his proposals would require congressional approval — which is hardly guaranteed.
That said, if still-incoming election returns show that the Republicans have maintained control of the House of Representations, Trump may have a decent chance of gaining passage of his legislative agenda now that Republicans have already won control of the Senate.
Automakers could again experience turmoil of 1958
This brings me to my second point. We know from history that the auto industry has had a long-standing tendency to emphasize higher-profit vehicles to the point where it has been caught flat-footed by sharp recessions.
Imagine the level of trauma that automakers could see if a Trump-induced recession hit with the intensity that it did in 1958, when the premium-priced field was hurt so badly that two brands ended up being discontinued (DeSoto and Edsel) and two more would move downmarket (Mercury and Dodge). Go here for further discussion).
To make matters even worse, today’s auto industry could have more difficulty meeting consumer demand for lower-priced vehicles than in past recessions because it suffers from far more conformity. Back in 1958 consumers could flock to imported small cars as well as compact economy cars built by remaining American independent automakers. Now that’s no longer the case.
Kelley Blue Book recently noted that the affordable car is dying in the United States. “In December 2017, automakers produced 36 models priced at $25,000 or less,” wrote Sean Tucker (2024). “Five years later, they built just 10. Now, most of those 10 are gone.”
Niedermeyer (2024) notes that the Toyota Corolla is one of the cheapest cars left on the market, yet a 2025 base model lists for upwards of $22,000. In addition, the Corolla has grown so much that it is actually bigger and heavier than a 1960 Ford Falcon.
Even Automotive News (2024) has expressed concerns about the auto industry abandoning low-priced cars. A recent editorial argued that chasing “record profits over the last decade with price increases and their culling of relatively inexpensive entry models, they permanently calved off perhaps 1 million or 2 million in annual sales from the U.S. new-vehicle market.”
In addition Automotive News (2024) noted that by “ignoring the lower end of the market for so long, incumbent automakers are also indirectly creating societal and political pressures that could one day force open the U.S. auto market to relatively inexpensive Chinese vehicles.”
The editorial writers might have added that those who ignore history are doomed to repeat it.
NOTES:
Specifications and prices are from manufacturers and Automobile Catalog (2024).
RE:SOURCES
- Automobile Catalog; 2024. “Full detailed specifications listing and photo gallery.” Accessed Nov. 7.
- Automotive News; 2024. “Affordability crisis shrank the market and could do long-term damage.” Posted Sept. 11.
- Niedermeyer, Paul; 2024. “The Death Of The Cheap New Car As Exemplified By These Two Corollas I Bought New in 2017 and 2024.” Curbside Classic. Posted Nov. 6.
- Picchi, Aimee; 2024. “5 ways Trump’s next presidency could affect the U.S. economy — and your money.” CBS Money Watch. Posted Nov. 7.
- Romm, Tony; 2024. “Musk’s plan to cut $2 trillion in U.S. spending could bring economic turmoil.” The Washington Post. Posted Oct. 29.
- Tucker, Sean; 2024. “Mitsubishi Mirage Canceled; Sub-$20K Cars Almost Gone.” Kelley Blue Book. Posted Aug. 7.
ADVERTISING & BROCHURES
- oldcarbrochures.org: Rambler (1958)
He’s talking a 60% tariff on Chinese imports. I’ve always been curious what the pricing of a car built with appointments drivetrain and dimensions of say, a 57 Bel Air would go for, with the caveat it must meet all current safety, mileage and emissions requirements. A 1957 Chevrolet Bel Air sedan had an MSRP of 2200 comes out to about 25k in today’s money. Except for perhaps roominess and trunk space that Corolla is superior in every way. Keep in mind that Bel Air had as optional cost side view mirrors, radio, varioous courtesy lights, etc. Let’s also discuss reliability and wear and tear. In five years, you;re probably on your third set of tires, sprung for a set of Rayco seat covers, and probably looking at tinworm infestation. Trade in value is probably a month’s wages. Your five year old Corolla looks and drives like new. You can easily get 10 years of normal service out of a modern car… I just took a quick glance at the MSRP of a base 2024 Ford Maverick, 24k. Not as well appointed as the Corolla, but plenty of room. The cars are out there, and I understanding the Mav is selling like hotcakes.
Here’s what The New York Times reporter Anna Swanson wrote yesterday about Trump’s tariff proposals: “While campaigning for the White House, Mr. Trump offered up a running list of tariffs. He talked about a ‘universal’ tariff of 10 to 20 percent on most foreign products. He has proposed tariffs of 60 percent or more on Chinese goods. . . . Mr. Trump has also promoted the idea of a ‘reciprocal’ tariff, in which the United States would match the tariff rates that other countries put on American goods. He has suggested using tariff revenue to replace income taxes. And he has threatened tariffs of 100, 200 or even 1,000 percent on Mexico, saying the country should do more to stop flows of migrants and shipments of Chinese cars.”
I wonder what effect this will have on Mary Barra and her 50 %-Chinese “Government Motors” strategic plans ? Are any Buicks actually built anywhere in North America ?
GM doesn’t really import a lot of cars from China. The only Chinese Buick is the Envision. The Envista is made in South Korea, the rest of Buick line we see in North America are made here in the USMCA zone. There are other China-specific Buicks we’ll never see here in North America that are made in China for the Chinese market. The vast majority of Chinese assembled GM products are for Chinese consumption, with a few exceptions, like the Sail cars sold in South America.
Unfortunately, there has been a tremendous march upmarket by the auto industry, largely driven by the shift toward higher profit SUV and truck models. We recently bought a 2024 Corolla Cross Hybrid to replace our 2010 Prius. The new Cross was about $7000 more than the Prius it replaced and actually cost more than my 2017 Highlander LE Hybrid, a much larger vehicle. A similar Highlander would be in the $50000 range today. At that price point, we are likely going to have to settle on a lesser vehicle when it’s time to replace the Highlander. Our magic number, and it’s likely similar for many others, is $35000. The industry is quickly pricing itself into a low volume spiral.
Thank the Maga part of the swamp; Elon straight outta of the South African apartheid
The decision of the liberal part of the murk (Mr Obama) to bail out GM (who could had blamed him, since at the same time bailed out the crem de la crem aka FIRE sector), was deadly
In the country of the cheap personal transportation (the collective West alas US) cheap cars are a vaporware
I think the industry would prefer to be in a low volume, high profit spiral, than a high volume, high loss spiral. I think the changes to CAFE rules made it easier for automakers to concentrate on high profit cars and no longer be required to produce inexpensive cars that lose money just to meet CAFE. I don’t like it all – I miss vehicles like the Toyota Yaris, Honda Fit, Chevrolet Sonic, etc.
Relatively recent CAFE rule changes apparently have had the perverse effect of encouraging automakers to concentrate on bigger vehicles (go here for further discussion). However, I’d like to see more evidence that smaller and cheaper cars always lose money.
I would suggest that the biggest difference between now and, say, 1970 is that back then there were automakers — particularly foreign — who specialized in small and economical cars. Now that’s not the case.
If I could wave my magic wand, I’d want to see someone enter the U.S. market that focused exclusively on selling small, economical and practical cars, SUVs and trucks with a mix of gas and electric power. These wouldn’t be the usual shitboxes, but a vehicle lineup that placed an emphasis on superior engineering, manufacturing quality and customer service. And they would be creatively marketed like the original VW Beetle (go here).
I suspect that this automaker would find a decent market — perhaps even big enough to push the legacy automakers to compete in it.
Do any of “Indie Auto” readers drive Kias or Hyundais (after 2010) as their daily drivers ? I am on my second base model Kia Soul (2014, then made an unbelievable deal to go to a 2016 Soul…I have a great dealer !). No major issues the timing chain-driven, gas-injection, normally aspirated 1.6-litre engine / 6-speed automatic. The Kia is a much better (and in my opinion, safer) vehicle than any Nissan in the approximate price range. Hey, I won’t win the stoplight drag race, but I am 74-years-old. I had the Kia out in western Kansas on Interstate 70 west in 2021 easily cruising and keeping up with traffic running over 80-m.p.h. No, it won’t out-accelerate an LS-engined Corvette or a Porsche, but it gets over 25-m.p.g. (and I can keep my insurance affordable)! As the now decade-old ad copy says: “Kia, Damn Fine Cars”!
Mr Trump’s boy friend disrupted the last manufacturing branch that the West and US still had a comparative advantage; the locally produced ICE automobiles. Since Tesla has made fashionable the electric car, ICEs will get more expensive. The collective West (aka US and EU) can’t produce cheap electric autos, since the necessary materials are owned by countries that no longer can be subdued by the neocons. So, we can remain with ultra expensive cars, now that the rest (7 billion people and their resources) are our non colonized enemies
The Salton Sea’s lithium resources in California are thought to be the world’s largest and could produce more than 3,400 kilotons of lithium, enough to power over 375 million electric vehicle (EV) batteries.
There was a full page ad advertising Fords in the Seattle Times this past weekend. What’s significant about the ad, was it had loss leader cars in the ad. I haven’t seen loss leader cars advertised in at least the last 4-5 years. I wonder if this is a start to a trend to revive car sales. The prices seemed downright reasonable compared to what I’ve seen since Covid.