00:00Hi, everybody. I'm Brittany Lewis, a breaking news reporter here at Forbes. Joining me now is
00:07Christian Scully, founder and managing partner at Scully Rasmussen. Christian, thank you so much
00:12for joining me. Thanks for having me. I'm really excited to get your perspective today because the
00:18majority of the clients you represent are in the retail automotive space. So I would love to get
00:23your take here on what tariffs are specifically doing to that industry. As we know, last week,
00:28President Trump dubbed Liberation Day as a day where he unveiled his widespread tariff policy.
00:35Also, something that went into effect last week are the tariffs on automobiles, a 25 percent levy on
00:40all imported vehicles. Tariffs on auto parts are expected to go into effect in early May.
00:46So to start off the conversation, what's your reaction to the tariffs as they relate to the auto
00:50industry? Well, it's a big change for sure. I think the the immediate effect, at least on the consumer,
00:59is it's it's for March and for April sales are looking to be the highest that they've been in a
01:06long time. As as people are, as some of the dealers are offering incentives, some of the factories are
01:13offering incentives to sell some of the existing inventory. The question is what's going to happen
01:22in the medium and long term? I think that's a little bit more difficult to answer, primarily because
01:28we don't know how the other countries are going to be responding. It hasn't been determined yet.
01:35For example, in the EU, they they met on Monday, but there's nothing concrete that's been developed
01:42out of that meeting. So we don't know exactly what's going to be happening in terms of countermeasures
01:49from from Europe or if Europe is going to come to the table and try to negotiate with President Trump.
01:57Same with Japan. Japan looks like they're sending a delegation to to Washington to negotiate
02:03with President Trump. So it's a little early, a little too early to tell what the long term effect
02:09is going to be. Overall, Americans over the past couple of days really didn't want to even look
02:14at their 401k because of the volatile reaction in the market to President Trump's tariff policy.
02:21This morning, Tuesday morning, we've seen a bit of a market comeback, but trillions in market value
02:26were wiped out in just a matter of days. Overall, what has been the auto industry's reaction to these
02:31tariffs? Has it been largely positive, largely negative? What have your clients been telling
02:35you? Well, what's interesting, at least from the factory's perspective, it's been all over the map.
02:41Different factories are taking different approaches. For example, Stellantis and Ford are offering
02:49incentives, employee pricing incentives to people to buy, which is pretty interesting. But you have
02:57on the more luxury side of the market, Ferrari, for example, increasing prices. So it's a little bit
03:04all over the map. But then you've got Hyundai, for example, is talking about bringing more of the
03:13manufacturing of its vehicles into the United States. So I think it's really, it kind of breaks
03:20down to a factory by factory policy. I know that when I've been talking to economists, they've been
03:29saying they don't really understand the why behind the tariffs. Is this President Trump trying to vastly
03:35change the economy? Is this President Trump trying to get other company or other countries rather to
03:40come to the table to start negotiating? President Trump said these auto related tariffs are, quote,
03:46reprioritizing U.S. manufacturing, and that President Trump recognizes that increasing domestic
03:52manufacturing is critical to U.S. national security. Does the auto industry have this sense that this will
03:59help U.S. manufacturing these tariffs, at least in the short term?
04:04Again, I think that depends on who you're talking to within the automotive industry. I have, I certainly don't
04:12have any insight personally into what President Trump is thinking. I think it's commendable for
04:19the administration to do whatever it can to bring manufacturing back to the U.S., particularly
04:24cities like Cleveland, Ohio could desperately use the revitalization that this could bring.
04:31And I also think that properly crafted tariff policy could be a valuable tool to bring auto and
04:39parts manufacturing back to the U.S. I also think, and I've heard from some others in the industry,
04:47that, you know, existing infrastructure, coupled with some vast improvements in efficiencies and
04:53robotics, and as well as the potential passage of the Transportation Freedom Act proposed by Senator Bernie
05:01Moreno in Ohio, could make manufacturing in the U.S. more viable and cost effective than it was,
05:08you know, when many companies decided to start manufacturing offshore. And I think it could
05:15result in some cost savings. But it has to take place over time. It's not something that can be
05:21changed immediately. And I think that even though the announcement caused a wave of consumer demand,
05:28which resulted in an all-time, you know, spike in the SAR in new vehicle sales in March, and looks like
05:36that's going to be happening in April as well, with everyone trying to buy a vehicle before the
05:41imposition of tariffs for the existing inventory, right, that the dealers have. Policy of this
05:47magnitude, I think, really requires a scalpel and not a hatchet. For example, the concept of
05:55graduated tariffs over time would give the auto manufacturers and suppliers time to retool or build
06:05here in the U.S. And factories need time to do that. So I think the approach could have been handled a little
06:18more delicately from the standpoint of ultimately getting to the goal, if the goal is to bring back
06:25manufacturing to the U.S. I think it's created a lot of volatility in the meantime that we probably
06:31didn't need.
06:31I know that the Auto Workers Union is excited about this. They were supporting President Trump.
06:38They applauded the Trump administration for, quote, stepping up to end the free trade disaster that
06:42has devastated working class communities for decades. I know that you're saying, hey, there should have
06:48been a scalpel, not a hatchet, but there's a lot of volatility now. Do auto dealers and manufacturers,
06:53do they get the sense that even though there is that volatility now, in the long term, these tariffs
06:59are going to benefit them? The dealers are very optimistic about the future. They think that
07:06this is ultimately going to help the U.S. economy, the auto industry. And for the most part,
07:13they're very bullish on it. So I think from the standpoint of the dealers, they're very hopeful
07:21that what's going to happen is there's going to be a series of negotiations and the dust will settle
07:28and it'll be a reordering of the auto industry, which will ultimately benefit the U.S.
07:35That's really interesting. When you're saying that there's going to be a reordering of the auto
07:39industry, what do you think that looks like in the long term? Because we know we say what we've been
07:44saying in this conversation, we don't know what that long term exactly is. But what does that
07:49reordering look like?
07:50Well, I think it's from the standpoint of the U.S. auto industry, I think they think that
07:57it's going to result in more manufacturing in the U.S., stronger U.S. economy. It can bring prices down
08:07without all the excess costs involved in importing.
08:13What's interesting in this conversation is you're saying that dealers saw increased sales in March
08:18and April. So I'm curious, is it a good time to buy a car right now? Should Americans go out if
08:23they're thinking about buying that car, purchase the vehicle before they see that sticker shock?
08:29100%. Right now is the best time to buy a car because you're getting a lot of incentives to buy
08:34cars right now. There's a lot of inventory that exists here that's not subject to the terrace because
08:40it's already created. It's already made. It's here on our soil. And dealers are and manufacturers
08:48are very eager to make sure that customers are served now before they have to deal with increased
08:56prices or lack of supply that may result from these tariffs if there's no negotiated resolution.
09:05So right now is a good time to get to the dealership. But when are people going to start seeing that
09:10sticker shock, start seeing those prices increase, how soon will those tariffs really go into effect
09:15where the consumer is seeing that increase? It could happen soon. How soon is a question. I know that
09:24some of the factories, some of the manufacturers have shuttered their plants in Mexico, for example.
09:31And that will create a reduced supply. And if there's a reduced, you know, what happens typically in a reduction
09:40of supply, prices go up. So that that could could happen pretty quickly. It really depends. And again, it depends
09:50on whether there's a negotiated resolution of these of these tariffs and things change.
09:54I know that you used a really interesting phrase in this conversation that you wished that there was a
10:01scalpel used instead of a hatchet. And I've had conversations like that with a lot of President
10:06Trump's policies in the first few months of his second term that people have wished from anything
10:11from doge cuts to things of that nature. I wish that there was a scalpel used instead of a hatchet.
10:16When you're seeing a hatchet used rather, there's a lot of unintended consequences that come with that
10:23sometimes. Are you seeing any unintended consequences come right now in the auto industry related to these
10:29tariffs? Well, sure, the markets have tanked, right? That's one thing. But I think, yes, you can't
10:40you can't really you can't really effectively do an across the board hike like this without
10:48unintended consequences. And while at least the dealers in the short term are benefiting from it
10:55in the in the sense of having increased sales right now and in March and April, I don't expect that to
11:03continue. And I think we haven't really hit yet the unintended consequences of this outside of the
11:10market issue. So then I think we should come back in a month or so and talk about those then when
11:15you're seeing people really react to that sticker shock. But until then, Christian Scali, thank you so
11:21much for joining me. Thank you for your insight. You are welcome back anytime. Thank you. Thank you,
11:26Brittany. It was very nice to talk with you.
