Did you know there are only about five new cars that cost less than $25,000 to start – and that two of them (the Nissan Versa and the Kia Soul) have already been cancelled? The third – the Hyundai Venue – is for now the least expensive new vehicle available in this country, with a base price of $20,550. But you’d better hurry if you want one at that price. Or any price. There’s an updated 2027 model in the works – but it’s probably not going to be offered here, because Trump’s tariffs have rendered it uneconomic for Hyundai to try to sell it here.

That tends to happen when a 25 percent tax is applied to anything. That’s what Trump’s “tariffs” are, by the way – as well as how much, applied to Korean made vehicles and not just them, either. Trump says he imposed these taxes to spur domestic manufacturing, which he argues will create manufacturing jobs. The problem is it won’t, for several reasons.

The first is that making vehicles (and other things) manufactured in other countries where it costs less to manufacture them more expensive to buy will not make things manufactured in this country cost less. It will only make everything cost the same. At least, not unless it somehow becomes less expensive to manufacture things here. How will that happen absent a significant reduction in manufacturing costs? Specifically, a significant reduction in regulatory compliance costs? Everything from breaking ground to constructing to operating a manufacturing facility in this country is very expensive; much more so than what it costs to break ground, construct and operate a manufacturing facility in Korea, say. It costs so much less that Hyundai can make the Venue at its Ulsan plant in South Korea and ship it all the way to the United States and still offer it for sale at a price that is thousands less than similar small crossovers made here.

The Chevy Trax is another such. It may wear an American badge, but the Trax – which is one of the other sub-$25k new vehicles you can still buy – is also made in South Korea, at GM’s Changwon plant. Once again, it is cheaper for GM to manufacture the Trax at a plant on the other side of the planet and absorb the costs of shipping it to the United States, because it is still cheaper to do that than it would be to manufacture the Trax here.

GM (and Hyundai) would need to increase the price of these vehicles by thousands, in order to be able to make a profit selling them here, if they were made here. The regulatory compliance costs have got to be recovered. The alternative being to “sell” vehicles at a loss.

Now, as counterpoint, consider the Ford Escape – which is another small crossover that’s also made in the USA. It’s a little larger than the Venue and the Trax but a lot more expensive. Its base price is $30,350 and thousands of that are embedded and transferred regulatory compliance costs. If this vehicle were manufactured in Korea it is probable Ford could offer it for $25k. But instead of doing something to make it less costly to manufacture the Escape and other vehicles here, what Trump has done is to punish the companies that manufacturer vehicles where it costs less to manufacture them, who pass that savings on to buyers.

As opposed to passing along the regulatory compliance costs.

AI and automation are not going to make things cost less – but they will help further dwindle the number of manufacturing jobs, since human workers will be obsoleted by AI and automation. Regulatory compliance costs will remain, however. So what will happen is there will be even fewer manufacturing jobs as manufacturers eliminate humans to offset their regulatory compliance costs while the U.S. “market” is walled off (effectively) from what would otherwise be lower-cost alternatives that are made too expensive  via the taxes styled “tariffs” – to bother importing here.

And what about the Tiny Cars Trump said he’d “approved” a few months back? Well, what he “approved” was that if anyone wished to manufacture such cars here, they would be allowed to do that. Thing is, they were never prohibited from doing that. The reason no one manufactures Tiny Cars here is because it would then cost too much to try to sell them here – those regulatory compliance costs, again – and it would make little sense to then ship those more-expensive-to-manufacture Tiny Cars across the ocean to Japan and other markets, where they’d have to be sold for thousands more than most people are willing to spend on such cars to recover the compliance costs.

Plus the shipping costs.

Also, these Tiny Cars can’t be sold here regardless – because they aren’t compliant with all the regs that every new vehicle must comply with in order to be legal to sell here. It would make little sense for Toyota, Nissan or Honda – who are some of the companies that manufacture Tiny Cars – to manufacture them (here) when they are not permitted to sell them here. The government would need to exempt them from such requirements as having to have multiple air bags and meet roof crush standards and so on – and the likelihood of that happening is on par with the likelihood of tariffs replacing the income tax.

. . .

If you like what you’ve found here please consider supporting EPautos. 

 

The post No Tiny Cars . . . But Definitely More Expensive Cars appeared first on EPautos - Libertarian Car Talk.