Trump election win: What it means for car prices

Donald Trump’s US presidential election win might be half a world away, but it could bear significant ramifications for Australia and its automotive industry.

Ushered into the White House on the pledge of removing illegal immigrants and ‘making America great again’, Trump has also made a clear point of reviving jobs and manufacturing in the US.

His surprise appointment sent shockwaves through world financial markets yesterday, similar to the crash that followed the UK’s Brexit vote. The turmoil even reached the Australian market yesterday, with the Australian Stock Exchange tumbling by roughly two per cent.

However, the damage was seemingly reversed this morning when markets recovered, buoyed on the back of renewed fiscal hope.

The big question now is whether Trump’s election could affect the sale of everyday goods in Australia including cars – either by rapid currency fluctuations, trade agreements or manufacturing blackouts.

According to industry figures, 4.9 per cent of vehicles imported into Australia hail from the US, while roughly 0.3 per cent of cars are imported from neighbouring Mexico.

US models imported into Australia stray well beyond typical Chrysler, Ford and Dodge products, too, with Mercedes-Benz, BMW and several other manufacturers utilising US manufacturing.

Australia also holds a Free Trade Agreement with the US, a treaty that will likely stay unchanged in an automotive sense, given Australia only exports a few hundred cars to the US each year under Holden’s soon-to-be ceased manufacturing operations – but in turn takes in excess of 50,000 exports annually.

Mercedes-Benz Australia corporate communications manager David McCarthy was cautiously optimistic around Trump’s victory and what it will mean for the Australian automotive scene.

“It’s probably too early to say what the impact will be,” he said. “But in terms of currency fluctuations, our vehicles are purchased six to 12 months ahead so I don’t see an immediate impact.”

Mercedes’ current US-built fleet comprises the GLE and GLE Coupe SUVs, along with the GLS. The German firm will also begin manufacturing its C-Class in the US from next year -- vehicles that have been slated predominantly for the US market.

“If Trump has said ‘we need to bring manufacturing back’ that’s only going to encourage someone making and exporting vehicles from the US,” McCarthy said.

“From an automotive sense, the free trade agreement means the vehicles come here without a tariff. For US manufacturers exporting product, including BMW, messing with NAFTA [North American Free Trade Agreement] isn’t going to help with manufacturing in the US, so [it would be best left alone].”

The Federal Chamber of Automotive Industries declined to comment for this story.

Commsec chief economist Craig James said that although it’s still early days, there is some risk of the US election result affecting new car prices in Australia.

“There is the risk that the US becomes isolationist or protectionist, and there is also the risk of re-negotiating trade agreements and putting up tariff barriers and the like. It could provoke other countries to do the same,” he said.

“We have to wait and see the composition of the Trump cabinet and see to what extent the Republican congress has a different view from the White House on different sorts of issues.

“The issue the markets are focusing on at the moment is the potential for lower tax rates and what that means for companies. It’s a case of watch and see at the moment."

The US auto industry has been encouraged by Trump’s win. The president-elect’s pledge to re-negotiate NAFTA, tax imported cars from Mexico and put a stop to new regulations – specifically those that could damage oil companies – could deliver a real boost to the industry, according to reports.

Specifically, Trump’s plan includes a pledge to impose a 35 per cent tax on products made in Mexico and exported back into the US by companies that move jobs to the country. Tellingly, his policies were reinforced by voters in the auto industry-heavy states of Indiana and Ohio.

“The trade policies of Hillary Clinton, from NAFTA to China to Korea to the Trans-Pacific Partnership, which by the way is a disaster, have raided your factories, crushed your auto industry and gutted your communities,” Trump said on the eve of the election. “You know it.”

While car-makers have been subject to increasingly stringent environmental targets in recent years, Trump is also intent on reducing the extent of these in the future. This could prove a significant cost saving for car-makers, which up until this point probably aren’t getting a return on investment in a sales sense.

Trump’s sentiments have created cause for concern internationally. Germany’s peak car-making body, VDA, has raised alarm at Trump’s new protectionist tariffs forcing carmakers to build vehicles in the US instead of Mexico.

Commsec economist James said that although Trump is intent on investigating trade agreements, the generous Australian-US treaty wasn't likely to be in the firing zone.

“The point that Trump is making is that where the US believes that some of the access is unfair and some of the trade deals that are being negotiated are unfair, they would re-look those," James said.

Image: Donald J Trump Facebook