1
00:00:02,120 --> 00:00:06,880
Speaker 1: The automobile industry is critically important to economies around the world,

2
00:00:07,080 --> 00:00:10,680
Speaker 1: and it's being buffeted from all sides. In the US,

3
00:00:10,840 --> 00:00:16,120
Speaker 1: consumer tastes have dramatically shifted, forcing manufacturers to retool their

4
00:00:16,160 --> 00:00:19,919
Speaker 1: product lines. Tesla is shaking up how the world looks

5
00:00:19,960 --> 00:00:24,360
Speaker 1: at electric cars. President Donald Trump is threatening tariffs on

6
00:00:24,560 --> 00:00:28,600
Speaker 1: imported autos in a bid to protect American jobs and

7
00:00:29,160 --> 00:00:34,199
Speaker 1: hanging all over. This is the steady march toward autonomous vehicles,

8
00:00:34,560 --> 00:00:38,000
Speaker 1: a change that will have profound implications not just for

9
00:00:38,080 --> 00:00:51,120
Speaker 1: the industry but for society as a whole. Welcome to Benchmark.

10
00:00:51,240 --> 00:00:55,320
Speaker 1: I'm Scott Landman, economics editor with Bloomberg News in Washington.

11
00:00:55,880 --> 00:00:59,320
Speaker 1: We're recording this just as the latest stats on auto

12
00:00:59,360 --> 00:01:03,120
Speaker 1: sales cross US the wire, showing that consumers are increasingly

13
00:01:03,160 --> 00:01:08,399
Speaker 1: abandoning Sedan's and sales overall we're underwhelming this past month.

14
00:01:08,720 --> 00:01:10,640
Speaker 1: On top of that, we have an endless flow of

15
00:01:10,680 --> 00:01:15,480
Speaker 1: news about Tesla, electric cars, driverless vehicles, and changing fuel

16
00:01:15,520 --> 00:01:19,959
Speaker 1: economy standards. Fortunately, we have someone with us who can

17
00:01:20,000 --> 00:01:23,920
Speaker 1: help make sense of all this. Ellen Hughes Cromwick is

18
00:01:23,959 --> 00:01:29,199
Speaker 1: a senior economist at the University of Michigan. Energy Institute. Previously,

19
00:01:29,360 --> 00:01:32,480
Speaker 1: she was chief economist at the U. S. Commerce Department,

20
00:01:32,720 --> 00:01:35,760
Speaker 1: and she was also chief economist at Ford Motor Company

21
00:01:36,040 --> 00:01:41,840
Speaker 1: for eighteen years. Ellen, thanks for joining us on Benchmark. Great, thanks,

22
00:01:41,880 --> 00:01:46,000
Speaker 1: God appreciate it. Ellen. I thought we'd call this four

23
00:01:46,040 --> 00:01:51,160
Speaker 1: big questions facing the auto industry. We have consumer tastes changing,

24
00:01:51,320 --> 00:01:56,120
Speaker 1: we have tariffs, electric vehicles, autonomous vehicles. Obviously we could

25
00:01:56,160 --> 00:01:59,400
Speaker 1: talk about a lot more, but let's start with those four.

26
00:02:00,040 --> 00:02:03,480
Speaker 1: Before we get to those topics, can you give us

27
00:02:03,760 --> 00:02:07,920
Speaker 1: some sense of how important the auto industry is to

28
00:02:08,560 --> 00:02:12,760
Speaker 1: the U. S. Economy and to the global economy. Great,

29
00:02:12,880 --> 00:02:17,280
Speaker 1: thanks Scott, Yes, it is very important. Let me first

30
00:02:17,280 --> 00:02:19,920
Speaker 1: say that, you know, if you look at just the

31
00:02:20,040 --> 00:02:25,880
Speaker 1: new vehicle market globally this year, probably you know, close

32
00:02:25,960 --> 00:02:32,640
Speaker 1: to a hundred million units will be purchased by consumers

33
00:02:32,680 --> 00:02:39,040
Speaker 1: in all countries, all markets. That would represent about two

34
00:02:39,240 --> 00:02:44,880
Speaker 1: trillion dollars of spending at an average vehicle price, you know,

35
00:02:45,040 --> 00:02:50,800
Speaker 1: around twenty so just taking the new vehicle market globally, wow,

36
00:02:50,919 --> 00:02:54,800
Speaker 1: it is a large market. If you look at all

37
00:02:55,000 --> 00:03:00,839
Speaker 1: vehicles on the roads globally, awards indicate Hates that as

38
00:03:00,880 --> 00:03:06,639
Speaker 1: of last year there were about one point three billion cars, utilities,

39
00:03:06,639 --> 00:03:13,200
Speaker 1: and trucks. That's both retail units bought by private buyers

40
00:03:13,200 --> 00:03:17,200
Speaker 1: in the retail market as well as commercial buyers, whether

41
00:03:17,280 --> 00:03:22,280
Speaker 1: they're fleets or you know, government purchases. Um. So that

42
00:03:22,760 --> 00:03:27,440
Speaker 1: one point three billion cars, utilities and trucks, along with

43
00:03:27,600 --> 00:03:30,920
Speaker 1: the new vehicle sales and then all the services that

44
00:03:31,000 --> 00:03:35,400
Speaker 1: we buy, you can imagine that that two trillion of

45
00:03:35,640 --> 00:03:39,920
Speaker 1: new purchases, you know, goes up from there, possibly as

46
00:03:40,000 --> 00:03:43,080
Speaker 1: high as seven trillion. I know that the CEO of

47
00:03:43,240 --> 00:03:48,040
Speaker 1: Uber was recently interviewed by Bloomberg and I think he

48
00:03:48,240 --> 00:03:52,480
Speaker 1: put a total size of the market at seven ellen.

49
00:03:52,560 --> 00:03:55,280
Speaker 1: Those are pretty big numbers. So when we're talking about

50
00:03:55,280 --> 00:04:00,760
Speaker 1: the US economy, about what percentage does the auto industry represent, again,

51
00:04:00,880 --> 00:04:04,800
Speaker 1: coming back to the new vehicle market, three to four

52
00:04:04,880 --> 00:04:09,680
Speaker 1: percent of g d P, right, so it's pretty significant

53
00:04:09,800 --> 00:04:13,520
Speaker 1: just and just talking about new vehicles. Let's move to

54
00:04:13,560 --> 00:04:17,200
Speaker 1: our first topic, which is new vehicle the new vehicle market.

55
00:04:17,560 --> 00:04:19,920
Speaker 1: It's the beginning of the month, which is when automakers

56
00:04:20,000 --> 00:04:24,279
Speaker 1: report their monthly sales and and something that's really caught

57
00:04:24,320 --> 00:04:27,240
Speaker 1: my eye in recent months is that, you know, not

58
00:04:27,320 --> 00:04:30,400
Speaker 1: only have sales been kind of flat overall, But we're

59
00:04:30,400 --> 00:04:35,520
Speaker 1: seeing this huge change in consumer tastes. You know, sales

60
00:04:35,560 --> 00:04:39,640
Speaker 1: of traditional sitan's like a four door Sedan, Honda Court

61
00:04:39,680 --> 00:04:42,520
Speaker 1: that sort of thing. Those are really going down and

62
00:04:43,320 --> 00:04:47,880
Speaker 1: SUVs are just going way up. I know this has

63
00:04:48,040 --> 00:04:50,159
Speaker 1: been kind of going on for a while, but it

64
00:04:50,200 --> 00:04:53,080
Speaker 1: just seems to be getting more and more pronounced lately.

65
00:04:53,920 --> 00:04:58,160
Speaker 1: Why is this happening and what implications does this have

66
00:04:58,360 --> 00:05:01,840
Speaker 1: for the industry in the ECONO, this has been a

67
00:05:01,880 --> 00:05:08,880
Speaker 1: trend in place for now more than a couple of decades,

68
00:05:09,279 --> 00:05:15,080
Speaker 1: and the market in consumer case of just really gravitated

69
00:05:15,560 --> 00:05:21,360
Speaker 1: towards this very attractive package of a crossover or what

70
00:05:21,440 --> 00:05:26,960
Speaker 1: you call an suv, whereby there's just more space, there's

71
00:05:27,320 --> 00:05:33,919
Speaker 1: um a just a much better set of attributes in

72
00:05:33,920 --> 00:05:36,520
Speaker 1: in those types of vehicles. You know, a lot of

73
00:05:37,080 --> 00:05:40,240
Speaker 1: women like to be higher up when they drive. I mean,

74
00:05:40,279 --> 00:05:45,680
Speaker 1: they just like to have a better viewpoint when they're driving,

75
00:05:45,800 --> 00:05:51,120
Speaker 1: and they are very much attracted to those types of vehicles.

76
00:05:51,120 --> 00:05:53,960
Speaker 1: So it's it's a trend, it's been in place. It

77
00:05:54,279 --> 00:05:57,360
Speaker 1: you know, we can see it in some other markets

78
00:05:58,080 --> 00:06:03,280
Speaker 1: as well. There is a a lot of buyers in China.

79
00:06:03,400 --> 00:06:07,360
Speaker 1: I will say, however, that I love the sedans, and

80
00:06:08,160 --> 00:06:13,080
Speaker 1: they like long vehicles, and they have different taste and

81
00:06:13,120 --> 00:06:17,480
Speaker 1: preferences than what we see in the US. And as

82
00:06:17,560 --> 00:06:23,719
Speaker 1: you know, in Europe, because fuel taxes are much higher

83
00:06:23,800 --> 00:06:27,240
Speaker 1: than they are here in the US, there is a

84
00:06:27,400 --> 00:06:36,080
Speaker 1: demand for a well contented UH car rather than a

85
00:06:36,120 --> 00:06:40,880
Speaker 1: crossover and an suv because the fuel cost is just

86
00:06:40,960 --> 00:06:44,719
Speaker 1: so much higher because of taxes. And what is the

87
00:06:44,800 --> 00:06:49,480
Speaker 1: economic impact if any of you know, all these automakers

88
00:06:49,520 --> 00:06:52,080
Speaker 1: that are kind of being maybe caught a little flat

89
00:06:52,120 --> 00:06:56,120
Speaker 1: footed right now, are sales lower than they otherwise could be?

90
00:06:56,200 --> 00:06:59,880
Speaker 1: Is or are these sales kind of a lost cause

91
00:07:00,080 --> 00:07:03,320
Speaker 1: that maybe, um, you know, some some companies were not

92
00:07:03,400 --> 00:07:07,760
Speaker 1: able to switch over fast enough to SUVs. I think

93
00:07:07,800 --> 00:07:10,880
Speaker 1: that most of the most of the major manufacturers have

94
00:07:11,640 --> 00:07:17,600
Speaker 1: UH lineups that really meet those consumer case and preferences.

95
00:07:17,760 --> 00:07:22,760
Speaker 1: What they're doing now is turning to electrified vehicles. And

96
00:07:23,480 --> 00:07:29,640
Speaker 1: by electrified vehicles, i'm referring to plug in hybrid electric

97
00:07:29,760 --> 00:07:38,080
Speaker 1: vehicles and battery electric vehicles. Plugins have an internal combustion,

98
00:07:38,320 --> 00:07:42,840
Speaker 1: you know, gasoline fueled engine along with an electric motor,

99
00:07:43,760 --> 00:07:48,960
Speaker 1: and those plugins do allow for recharging of the vehicle

100
00:07:49,200 --> 00:07:54,320
Speaker 1: a battery electric vehicle does not have a gas powered engine.

101
00:07:54,440 --> 00:08:00,680
Speaker 1: It is only fueled by batteries that are recharged. Both

102
00:08:01,000 --> 00:08:06,840
Speaker 1: those UM plugins and electric battery electric vehicles are really

103
00:08:06,960 --> 00:08:11,160
Speaker 1: where the manufacturers are now turning. And that's going to

104
00:08:11,240 --> 00:08:17,560
Speaker 1: be very exciting because it will offer up the investing

105
00:08:18,080 --> 00:08:22,080
Speaker 1: that they're going to be doing now to open up

106
00:08:22,080 --> 00:08:30,360
Speaker 1: the gateway to more autonomous vehicle content and having an

107
00:08:30,360 --> 00:08:36,760
Speaker 1: electrified platform upon which to put the connected and automated

108
00:08:36,880 --> 00:08:43,000
Speaker 1: vehicle content is really the avenue that they're pursuing for many,

109
00:08:43,120 --> 00:08:47,240
Speaker 1: many different reasons. Let's take one at a time. Let's uh,

110
00:08:47,280 --> 00:08:50,319
Speaker 1: we did want to talk about electric vehicles, electrified vehicles.

111
00:08:50,880 --> 00:08:54,000
Speaker 1: What is the state of that market right now? I

112
00:08:54,040 --> 00:08:57,199
Speaker 1: know the sales have been increasing, and there's been predictions

113
00:08:57,200 --> 00:08:59,640
Speaker 1: for years that there's that they're going to take off.

114
00:09:00,200 --> 00:09:03,640
Speaker 1: I think your listeners will be surprised to learn that

115
00:09:04,000 --> 00:09:11,320
Speaker 1: the growth of electric or electrified vehicles is very high,

116
00:09:11,360 --> 00:09:15,840
Speaker 1: in the double digits globally. UH. Right now, as of

117
00:09:15,960 --> 00:09:20,040
Speaker 1: two thousand eighteen, we estimate that there are about five

118
00:09:20,160 --> 00:09:25,679
Speaker 1: million units on the roads UH when this year comes

119
00:09:25,720 --> 00:09:30,400
Speaker 1: to a close, and that would include one point nine

120
00:09:30,520 --> 00:09:34,480
Speaker 1: million units of sales this year. Some of it is

121
00:09:35,080 --> 00:09:41,400
Speaker 1: because there are policy stimulus UM tools in in play,

122
00:09:41,559 --> 00:09:46,760
Speaker 1: particularly in China and in Europe, where some subsidies or

123
00:09:46,880 --> 00:09:54,120
Speaker 1: credits or registration exemptions are available to buyers. But even so,

124
00:09:54,200 --> 00:09:59,040
Speaker 1: I think, you know, what's fascinating about this is that

125
00:09:59,840 --> 00:10:08,160
Speaker 1: the trend toward electric vehicles is tied to this future

126
00:10:08,200 --> 00:10:14,320
Speaker 1: of autonomous vehicles. And you know, what we're learning is that,

127
00:10:15,120 --> 00:10:21,920
Speaker 1: you know, automotive manufacturers recognize the simplicity of the engineering

128
00:10:22,040 --> 00:10:26,880
Speaker 1: in an electric vehicle and why that serves as a

129
00:10:27,160 --> 00:10:33,160
Speaker 1: very efficient platform upon which to put this autonomous content.

130
00:10:33,880 --> 00:10:36,440
Speaker 1: So in other words, you know, they kind of have

131
00:10:36,600 --> 00:10:41,280
Speaker 1: to make a capital spending decision to really focus on

132
00:10:41,360 --> 00:10:46,680
Speaker 1: the electrified platform and not the internal combustion engine. Let's

133
00:10:46,720 --> 00:10:49,440
Speaker 1: just talk about the electric vehicle side of it. How

134
00:10:49,520 --> 00:10:54,480
Speaker 1: much capital spending will automakers be putting in towards, you know,

135
00:10:54,559 --> 00:10:57,600
Speaker 1: making that transition and figuring out how to build these

136
00:10:57,679 --> 00:11:01,080
Speaker 1: vehicles in the next five to ten years. I don't

137
00:11:01,120 --> 00:11:05,720
Speaker 1: have an estimate for you on that directly. You know,

138
00:11:05,720 --> 00:11:10,200
Speaker 1: it would be great to UM have that number. I

139
00:11:10,240 --> 00:11:13,080
Speaker 1: think all of us are trying to trying to figure

140
00:11:13,120 --> 00:11:15,400
Speaker 1: that out. But is it going to be a significant

141
00:11:15,480 --> 00:11:20,360
Speaker 1: amount of significant portion of what automakers are spending. Yes,

142
00:11:20,520 --> 00:11:24,240
Speaker 1: and I would add to it that you know, it's

143
00:11:24,240 --> 00:11:27,960
Speaker 1: going to be capital spending on electrified and then add

144
00:11:28,000 --> 00:11:32,559
Speaker 1: to that the spending that they're doing to put connected

145
00:11:32,600 --> 00:11:36,800
Speaker 1: and automated vehicle content into the video. It's really both

146
00:11:36,840 --> 00:11:41,079
Speaker 1: of them together, is just absolutely and I think they're

147
00:11:41,120 --> 00:11:45,400
Speaker 1: they're joined at the hip that that both of them,

148
00:11:45,440 --> 00:11:49,880
Speaker 1: you know, combined are really going to be their strategic focus.

149
00:11:49,920 --> 00:11:52,319
Speaker 1: And if you you look at some of the popular

150
00:11:52,360 --> 00:11:57,240
Speaker 1: press about how many electrified vehicles will be coming out

151
00:11:58,120 --> 00:12:06,240
Speaker 1: between now and the number of of you know, vehicles

152
00:12:06,400 --> 00:12:12,719
Speaker 1: really skyrockets, and uh, that's going to require retooling plants

153
00:12:13,040 --> 00:12:17,440
Speaker 1: and reconfiguring and making sure that you know, they've got

154
00:12:17,720 --> 00:12:22,280
Speaker 1: capital efficiency in these plants over time. So is there

155
00:12:22,280 --> 00:12:24,640
Speaker 1: going to be the kind of what we might call

156
00:12:24,760 --> 00:12:28,840
Speaker 1: creative destruction of a lot of kinds of parts makers

157
00:12:28,960 --> 00:12:33,840
Speaker 1: and the formation of new companies or recreation of companies

158
00:12:33,880 --> 00:12:37,839
Speaker 1: to perform these tasks and to make these new parts

159
00:12:37,840 --> 00:12:42,160
Speaker 1: and other technologies that are that will be needed. Oh, Scott,

160
00:12:42,240 --> 00:12:45,760
Speaker 1: you just hit you hit the point directly. Absolutely. I

161
00:12:45,800 --> 00:12:48,679
Speaker 1: think that we're going to see a lot of uh,

162
00:12:48,840 --> 00:12:53,559
Speaker 1: the so called Chumpeter creative destruction, and it's already happening

163
00:12:53,600 --> 00:12:57,240
Speaker 1: in some respects. I mean, you think about what Tesla

164
00:12:57,360 --> 00:13:01,680
Speaker 1: has accomplished. They have really in a trend setter in

165
00:13:02,840 --> 00:13:07,760
Speaker 1: developing a giga factory, a battery pack that lays horizontally

166
00:13:07,880 --> 00:13:13,080
Speaker 1: on the platform of their electrified vehicles, and really reaching

167
00:13:13,120 --> 00:13:19,720
Speaker 1: out to develop charging infrastructure for their buyers. And now

168
00:13:19,720 --> 00:13:24,600
Speaker 1: that I think generated a lot of disruption and you know,

169
00:13:24,679 --> 00:13:29,720
Speaker 1: kind of aha moments among the traditional automakers to say, yeah,

170
00:13:29,760 --> 00:13:32,880
Speaker 1: this really is going to happen. And I wanted to

171
00:13:32,920 --> 00:13:36,600
Speaker 1: mention Scott that one of the reasons why this trend

172
00:13:36,800 --> 00:13:40,760
Speaker 1: seems to be much more apparent and perhaps happening at

173
00:13:40,760 --> 00:13:45,440
Speaker 1: a faster pace than than what some analysts may think,

174
00:13:45,760 --> 00:13:49,400
Speaker 1: is that the cost of the battery cells and the

175
00:13:49,440 --> 00:13:53,840
Speaker 1: battery packs for these vehicles is coming down at a

176
00:13:53,920 --> 00:14:00,200
Speaker 1: faster pace. Already, we're seeing potential, you know, cost structures

177
00:14:00,280 --> 00:14:05,000
Speaker 1: that um get us to a point where the retail

178
00:14:05,160 --> 00:14:10,280
Speaker 1: price of a battery electric vehicle is coming very close

179
00:14:10,440 --> 00:14:16,720
Speaker 1: to a comparable internal combustion engine vehicle, and that that'll

180
00:14:16,800 --> 00:14:20,080
Speaker 1: really be an important tipping point because if you know,

181
00:14:20,200 --> 00:14:24,920
Speaker 1: consumers walk into the dealership and they see that there's

182
00:14:25,000 --> 00:14:30,200
Speaker 1: more price parity between these two types of vehicles. Um,

183
00:14:30,360 --> 00:14:32,680
Speaker 1: you know, it may just tip the scale to get

184
00:14:32,720 --> 00:14:37,600
Speaker 1: them to buy electrified vehicles. Well, that might not be

185
00:14:37,680 --> 00:14:41,800
Speaker 1: the only tipping point when it comes to vehicles. When

186
00:14:41,800 --> 00:14:46,600
Speaker 1: we look at autonomous vehicles, another tipping point may very

187
00:14:46,600 --> 00:14:50,000
Speaker 1: well be do you even need a car? Do you

188
00:14:50,000 --> 00:14:53,080
Speaker 1: even need your own car? Ellen, When you look out

189
00:14:53,120 --> 00:14:56,960
Speaker 1: at the auto industry and these trends in electrified vehicles

190
00:14:57,000 --> 00:15:02,040
Speaker 1: and autonomous vehicles in the next years, do you see

191
00:15:02,440 --> 00:15:08,600
Speaker 1: sales increasing, decreasing, or or or slowing. The scenario that

192
00:15:08,600 --> 00:15:12,880
Speaker 1: that we're working on kind of goes like this, that

193
00:15:13,440 --> 00:15:18,920
Speaker 1: we're in a period now where there is this manufacturing

194
00:15:19,080 --> 00:15:24,600
Speaker 1: and kind of physical transition toward electrified vehicles that is

195
00:15:24,680 --> 00:15:30,080
Speaker 1: really being fostered by two developments. One is this reduction

196
00:15:30,120 --> 00:15:34,080
Speaker 1: in the battery cost, which is critical, and then the

197
00:15:34,200 --> 00:15:39,920
Speaker 1: second one is the fact that we are seeing automakers

198
00:15:40,080 --> 00:15:45,040
Speaker 1: recognized that they need to have the electrified platform in

199
00:15:45,320 --> 00:15:49,400
Speaker 1: order to put the autonomous content and features onto it

200
00:15:49,520 --> 00:15:53,480
Speaker 1: for a lot of engineering and economic reasons. Those are

201
00:15:53,520 --> 00:15:57,880
Speaker 1: really married together. When we look at all of the

202
00:15:58,040 --> 00:16:05,480
Speaker 1: testing and software or development for autonomous content in a vehicle.

203
00:16:06,040 --> 00:16:08,720
Speaker 1: We see that that's going to take a longer period

204
00:16:08,760 --> 00:16:13,720
Speaker 1: of time. We need to have many more simulations, many

205
00:16:13,800 --> 00:16:20,760
Speaker 1: more miles of testing, and also a regulatory structure. We

206
00:16:20,840 --> 00:16:27,760
Speaker 1: really don't have substantive regulations yet for connected and automated vehicles.

207
00:16:27,760 --> 00:16:31,440
Speaker 1: That all is going to take a more extended, you know,

208
00:16:31,600 --> 00:16:35,560
Speaker 1: period of time to to really play out. So this

209
00:16:35,720 --> 00:16:40,040
Speaker 1: really this transition you know, I think will take place

210
00:16:40,120 --> 00:16:45,040
Speaker 1: over the next ten to fifteen years UM. Now, could

211
00:16:45,080 --> 00:16:51,080
Speaker 1: there be periods when it, you know, happens more rapidly, absolutely,

212
00:16:51,200 --> 00:16:57,120
Speaker 1: especially if the cost per mile traveled goes down because

213
00:16:57,120 --> 00:17:02,280
Speaker 1: of shared car sharing and other mobile apps that really

214
00:17:02,400 --> 00:17:07,199
Speaker 1: bring to the for if that cost per mile traveled

215
00:17:07,880 --> 00:17:14,680
Speaker 1: falls as more autonomous content is putting these vehicles, then

216
00:17:15,000 --> 00:17:19,240
Speaker 1: you know, you really need fewer units to be honest.

217
00:17:20,400 --> 00:17:23,879
Speaker 1: All right, Well, let's go back from the future to

218
00:17:24,000 --> 00:17:27,720
Speaker 1: the present to something that's not a simulation, and that

219
00:17:27,840 --> 00:17:31,280
Speaker 1: is the trade war that we're finding us in now

220
00:17:31,320 --> 00:17:34,680
Speaker 1: at the behest of President Donald Trump, something we frequently

221
00:17:34,720 --> 00:17:39,560
Speaker 1: talked about on this podcast. At this point, the President

222
00:17:39,760 --> 00:17:45,639
Speaker 1: has been threatening tariffs on imported automobiles. He hasn't quite

223
00:17:45,880 --> 00:17:50,840
Speaker 1: followed through on that global threat yet, although it does

224
00:17:51,200 --> 00:17:56,480
Speaker 1: seem to be still very much there. Ellen, if we

225
00:17:56,480 --> 00:18:01,640
Speaker 1: were to see a true ratch it up of tariffs

226
00:18:01,640 --> 00:18:06,840
Speaker 1: on cars coming into the US, replete with reciprocal or

227
00:18:06,920 --> 00:18:11,760
Speaker 1: retaliatory tariffs from other countries, how much of a disaster

228
00:18:11,880 --> 00:18:16,439
Speaker 1: would that be for the global economy? When consumers go

229
00:18:16,520 --> 00:18:21,639
Speaker 1: out and buy vehicles, you know, that's a big decision

230
00:18:22,320 --> 00:18:26,159
Speaker 1: for by for for people here in the US, but

231
00:18:26,280 --> 00:18:30,520
Speaker 1: really across the world, and in the short run, you know,

232
00:18:30,640 --> 00:18:34,320
Speaker 1: consumer demand for a large, durable good can be very

233
00:18:34,480 --> 00:18:41,119
Speaker 1: price sensitive. Now, the US Commerce Department started their investigation

234
00:18:41,280 --> 00:18:48,120
Speaker 1: last May to determine whether imported cars and components were

235
00:18:48,119 --> 00:18:53,240
Speaker 1: really a threat to national security and worthy of a

236
00:18:53,640 --> 00:18:58,879
Speaker 1: of an import tariff as much as twenty five You know,

237
00:18:58,920 --> 00:19:04,720
Speaker 1: it's not like Lee's at an auto manufacturer in Europe

238
00:19:04,800 --> 00:19:10,200
Speaker 1: would pass along all of that cost to the buyer.

239
00:19:10,960 --> 00:19:15,600
Speaker 1: But even if it was half of that tariff um,

240
00:19:15,640 --> 00:19:20,840
Speaker 1: I do think it would disrupt demand quite a bit

241
00:19:21,320 --> 00:19:25,080
Speaker 1: here in the US. Is that something that would cause

242
00:19:25,119 --> 00:19:28,399
Speaker 1: a recession or be a strong factor that would that

243
00:19:28,440 --> 00:19:31,600
Speaker 1: would add to the risk of a recession? I don't

244
00:19:31,640 --> 00:19:36,640
Speaker 1: think it's um at that level of disruption. I think

245
00:19:36,680 --> 00:19:43,760
Speaker 1: it would be part of a broader sentiment shift associated

246
00:19:43,920 --> 00:19:50,639
Speaker 1: with all the uncertainty that this tariff cabal has caused

247
00:19:50,720 --> 00:19:55,280
Speaker 1: for consumers and businesses. And you know, right now we're

248
00:19:55,280 --> 00:20:00,080
Speaker 1: in the middle of this tariff you know, kind of

249
00:20:00,160 --> 00:20:04,399
Speaker 1: novel and uh, we just don't know what the ending

250
00:20:05,640 --> 00:20:10,240
Speaker 1: is likely to be. And it's partly that uncertainty that

251
00:20:10,400 --> 00:20:16,639
Speaker 1: can tip the economy. I've got my favorite data buffet

252
00:20:16,960 --> 00:20:20,360
Speaker 1: of you know, about twenty indicators that I look at,

253
00:20:21,200 --> 00:20:25,400
Speaker 1: and you know, the ones that are most concerning can

254
00:20:25,480 --> 00:20:32,480
Speaker 1: be you know, very fast shifts in consumer and business sentiment.

255
00:20:33,080 --> 00:20:39,680
Speaker 1: We go from being overly optimistic to overly pessimistic. And

256
00:20:40,040 --> 00:20:44,040
Speaker 1: once that starts, it can happen very rapidly in a

257
00:20:44,080 --> 00:20:48,479
Speaker 1: matter of a few months. And that's when businesses stop

258
00:20:49,080 --> 00:20:54,199
Speaker 1: capex and consumers lock up their wallets. And so I

259
00:20:54,240 --> 00:20:58,639
Speaker 1: think there is a risk of that type of disruption.

260
00:20:59,480 --> 00:21:03,400
Speaker 1: It's big more than just autos, however, it's more along

261
00:21:03,440 --> 00:21:06,120
Speaker 1: the lines of, you know, we were not quite sure

262
00:21:06,160 --> 00:21:09,920
Speaker 1: if we are going to have a North American um,

263
00:21:09,960 --> 00:21:13,160
Speaker 1: you know, trade deal, whatever we want to call it.

264
00:21:14,040 --> 00:21:19,080
Speaker 1: Not sure if we're going to prosecute um you know

265
00:21:19,240 --> 00:21:24,320
Speaker 1: section to thirty two of the trade law which would

266
00:21:24,480 --> 00:21:32,080
Speaker 1: encumber our imports from Europe and and also more terroriffts

267
00:21:32,160 --> 00:21:38,680
Speaker 1: from China. It's it's a very long list of elements

268
00:21:38,800 --> 00:21:43,640
Speaker 1: that generate uncertainty and therefore you know, tax our decisions

269
00:21:43,760 --> 00:21:49,240
Speaker 1: to buy, invest, and undertake any type of economic activity.

270
00:21:49,359 --> 00:21:54,840
Speaker 1: That's the to me, that's the big risk for a recession.

271
00:21:55,520 --> 00:21:58,280
Speaker 1: And I know a lot of economists are talking about

272
00:21:59,680 --> 00:22:04,600
Speaker 1: I know could my concerns it could happen, happened much

273
00:22:04,640 --> 00:22:10,080
Speaker 1: faster than maybe, you know, the broad set of indicators

274
00:22:10,600 --> 00:22:15,920
Speaker 1: tell us today. Well, Ellen, on that optimistic note, maybe

275
00:22:15,960 --> 00:22:19,080
Speaker 1: we should end there. Ellen Hughes Cromwick, thank you very

276
00:22:19,160 --> 00:22:21,720
Speaker 1: much for taking the time to talk about the auto

277
00:22:21,760 --> 00:22:25,000
Speaker 1: industry and the global economy. I really learned a lot today.

278
00:22:25,600 --> 00:22:36,560
Speaker 1: Thank you, Scott. I appreciate it. Benchmark. You will be

279
00:22:36,600 --> 00:22:39,000
Speaker 1: back next week. Until then, you can find us on

280
00:22:39,000 --> 00:22:42,320
Speaker 1: the Bloomberg terminal, Bloomberg dot com or Bloomberg app, as

281
00:22:42,320 --> 00:22:47,080
Speaker 1: well as podcast destinations such as Apple Podcasts, Spotify or

282
00:22:47,119 --> 00:22:49,600
Speaker 1: wherever you listen. We'd love it if you took the

283
00:22:49,640 --> 00:22:52,600
Speaker 1: time to rate and review the show, so more listeners

284
00:22:52,600 --> 00:22:55,320
Speaker 1: can find us and you can find us on Twitter,

285
00:22:55,680 --> 00:22:59,359
Speaker 1: follow me at scott Landman and our guest is at

286
00:22:59,359 --> 00:23:03,919
Speaker 1: Ellen Hughes c r o M. Benchmark is produced by

287
00:23:03,960 --> 00:23:08,000
Speaker 1: Toford Foreheads. The head of Bloomberg Podcasts is Francesca Levy.

288
00:23:08,480 --> 00:23:10,320
Speaker 1: Thanks for listening, See you next time.