Industry Voices | Tracking the auto industry amid major changes
U.S. auto industry reporting has traditionally relied on year-over-year or month-over-month data, but amid tariff increases and reduced Inflation Reduction Act incentives, such comparisons can be misleading. RFQ Insights proposes a tracking framework based on baseline forecasts, covering economic, employment, and production indicators, with quarterly updates planned to assess the effects of policy changes.
Reporting on the performance of the American automotive industry has been a routine task in journalism for over a century. The traditional approach is to compare the current period with the previous period or the same period last year. Sometimes analysts compare current performance with historical sales or production peaks. WardsAuto excels in daily reporting on the state of the industry, keeping dealers, suppliers, and original equipment manufacturers informed of today's developments.
However, in the context of increased tariffs and industrial policy adjustments, this comparative method may not be the best way to monitor. For example, the Congressional Budget Office (CBO) provides projections of future economic activity based on current tax and spending rules, enabling economists to measure how new policies change their forecasts (to their credit, they also publish the accuracy of their forecasts). Additionally, in bankruptcy proceedings, consultants provide investors with "going concern" versus "liquidation" analyses. The investment rationale for new vehicle programs is typically justified by comparing the new program's volume against an alternative scenario of inaction (i.e., continuing the existing model for several more years). These analytical frameworks compare two possible futures, rather than comparing with last year.
According to announcements from the White House, automotive industry stakeholders should expect the status quo to be severely disrupted soon. Increased tariffs and reductions in Inflation Reduction Act (IRA) incentives are, among other things, two seemingly certain changes. Therefore, a method capable of tracking the impact of these policies over multiple years is needed.
RFQ Insights has organized a baseline forecast of key metrics for this purpose. This forecast assumes current government laws and regulations remain unchanged, but excludes proposed tariffs and potential changes to the IRA. The outlook incorporates economic and employment projections from the Congressional Budget Office. The production outlook is based on incentives provided by the IRA, reflecting modest growth in U.S. light vehicle production and capacity over the coming years. Projections for program additions and cancellations are sourced from industry experts at AutoForecast Solutions.
All metrics are projected through 2027. This wider forecast window is crucial because many of the benefits provided by the IRA will not materialize until 2027, including Ford's battery electric vehicle (BEV) capacity expansion in Tennessee, General Motors launching the new Bolt at its Kansas plant and increasing production, and Scout's production in South Carolina. Additionally, some currently imported programs will shift to U.S. production. All these changes are expected to bring more production, a more diverse range of models, and more jobs.
Each quarter going forward, we will provide performance updates on key metrics. The reports will indicate whether metrics are improving, holding steady, or deteriorating. The updated tables and analyses will be part of the RFQ Vehicle Performance Tracker.
Can tariffs bring jobs back to the United States and increase vehicle production at American factories? These are questions worth tracking. As Trump stated on September 5, 2024, at the Economic Club of New York: "We will bring car manufacturing back to record levels of 37 years ago, and we will be able to do so through tariffs and other wise uses of what we have and others don't,"very quicklyaccomplish this."
Automotive industry journalists will track the realization of this vision over the next three years.
About the Author
Warren Browne is an adjunct professor of economics and trade at Lawrence Technological University in Southfield, Michigan, and serves as President of RFQ Insights.