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Welcome to Daily Drive. For Thursday, September 11th, 2025,
I'm Kellyn Walker at Automotive News Congress in Detroit.
Today on the show, Hyundai and LG workers are heading back to Korea despite an overture from
President Trump to stay. Analysts say Tesla drivers are defecting to legacy brands in big numbers,
and ZF will get a new CEO as the supplier restructures and cuts jobs. Plus, TD Cowan's
E-Tie McKellie talks about how well the auto industry is adapting to tariffs.
Some of the resilience we're seeing today may be tied to de-urbanization
trends that began during COVID, so people leaving cities and therefore purchasing long,
maybe even multiple vehicles in their household.
Let's run through all the news you need to know to keep up in the auto industry.
Hundreds of Hyundai LG workers that were detained in an immigration raid last week in
Georgia are headed back to South Korea. That's despite a last-minute offer from President
Donald Trump to allow the workers to stay. Only one worker opted to stay,
according to South Korean officials. They said Trump's offer was meant to encourage
the workers to stay and train Americans. The plane is now scheduled to leave
the U.S. later in the day Thursday. TV footage showed the workers boarding buses outside
the barbed wire clad fences of a detention center at around 2 a.m. to go to the Atlanta
airport. Tesla owners are defecting to legacy brands in big numbers.
Analysts say they're choosing a mix of gasoline vehicles, hybrids, and EVs,
as Tesla's once sky-high loyalty numbers plummet compared with last year.
They cite Tesla's aging lineup, a limited product portfolio with just two volume models,
and a loss of brand value from CEO Elon Musk's right-wing political activism.
In the latest data from S&P Global Mobility, Tesla's loyalty numbers fell more than nine
percentage points from the second quarter last year. Only the Dodge brand did worse,
falling 12.7 percentage points in the same period. And global auto supplier ZF says it
will replace CEO Holger Klein, who has decided to step down early by mutual agreement.
ZF said the head of its electric division, Matthias Meadreich, will succeed Klein on September 30th.
The world's fourth largest auto supplier is restructuring. It's shedding thousands of jobs
in response to the sluggish car industry. And those are today's headlines. You can find more
details on all those stories at AutoNews.com. Coming up, a new study from TD Cowan shows
the auto industry has been pretty resilient amid tariffs so far. We'll hear from the firms
Etai McKelley next on Daily Drive. For over 100 years, Ally has helped dealers like you serve
your customers by providing the best in-class products and services you need. And by remaining
true to the automotive passion, we share. Your dedicated Ally account executive will work hand
in hand with you to help you gain efficiencies, increase your product offerings, and work to improve
per vehicle revenue. Because we care about your business as much as you do. We're all
better off with an Ally. Contact your local Ally account executive to get started today.
Ally, do it right. Welcome back to Daily Drive. I'm Kellen Walker. President Trump's
tariffs have not made things especially easy for automakers and suppliers so far this year.
But a new study from TD Cowan finds that the industry has done a good job
weathering the challenges that tariffs pose. Our own Molly Boygon spoke with Etai McKelley,
Auto's equity research analyst at TD Cowan. Etai McKelley, Senior U.S. Auto's mobility
analyst at TD Cowan. Thanks so much for joining us on Daily Drive. Thank you for having me.
So you have done some analysis of U.S. auto demand resilience in the wake of some of the
tariff policy. And it appears to maybe be better than expected. How are things looking from where
you sit? Yeah, absolutely. I think there's two areas if you look back at the last three or
four months that have proven to be far more resilient than consensus expectations at that
time. The first, as you mentioned, tariffs. I think the initial view by many going back
to kind of April and May is that the tariffs would have led to significant increases in vehicle
pricing. Our view from doing a pretty detailed bottom-up model at the time was that you actually
wouldn't see more than maybe 1.5% of incremental pricing based on our rationale that in every
individual segment there would be some vehicles that would not have been affected as much by
tariffs and therefore that would kind of prevent the overall segment pricing from inflating too
high to offset the tariff. And so far, it's kind of played out in that direction. The second area
when we've seen greater resilience is actual consumer demand itself. And there we've seen a
lot of misconceptions over the years. In our world, there's been this expectation of peak
auto now for many, many years, peak volume, peak pricing. And that we think from the work
that we've done at TD Cowan based on a proprietary survey that forecasts probably the single most
important input into the forecast model, which is the future direction of vehicle per household
density. We think that there is continued resilience to come based in part on certain
trends that we've seen in the survey that we can talk about the urbanization being one.
So tariff impact thus far in terms of vehicle prices are proven to be far less severe.
And the underlying consumer demand also has proven stronger in our view tied in part to
probably overlook tailwinds on U.S. vehicle density that have been playing out now for some time.
Let's talk first about the differences you described across vehicles and segment groups.
So why are some vehicles in a segment group not being as impacted by the tariffs and how is that
preserving price consistency across a segment? Sure. Yeah, so our working assumption through this
all was that vehicles will generally compete with each other on a segment by segment basis.
And when you have, let's say, a vehicle in a segment, a high volume vehicle that maybe is
not as affected by the tariffs that it's produced in the U.S., has a high amount of U.S. content,
then the automaker will not need to raise the price so much on that particular vehicle,
which in effect will mean that the other vehicles competing that may have more of a tariff impact
if they're imported from overseas or produced in Mexico or Canada, they would have a harder time
passing along their tariff increase or else they would lose market share to the vehicle
that is least affected. So our working rationale for the past few months and now
is that in most segments, there are at least a couple of these vehicles that are less affected.
And so we assume that in every segment, the price of the vehicle of that segment would
effectively go up by the least affected high volume vehicle in that segment. And we kind of
ran it up in a bottom-up basis. It led to only room for about one 1.5% of the price
increase itself. So in effect, our view has been that the automakers would largely
absorb those tariffs. What's interesting is that as underlying consumer demand has been strong and
therefore vehicle inventory has been low, you can argue now there is some room for potential price
or mixed optimization, not so much directly tied to tariffs, but because of just stronger
underlying demand and lower production year to date, that's kept dealer inventory for new
vehicles very much in check at about 2.5 million vehicles still well below historical norms.
And when you talk about that stronger underlying demand, that kind of goes back to what you were
saying about your predictions for the future direction of vehicle per household density, which
if I understand it correctly means the numbers of vehicles per household. Is that right?
Absolutely, Molly. The US is very unique in the sense that we have the most vehicle per
household of any major economy in the world at about two vehicles per household. And one of the
reasons why SAR has almost seemingly constantly surprised forecasters, even going back to 070809
in our reports, we actually list all the different times where people thought the
SAR would go one way directionally and went the other way. One of the reasons that surprise
factor exists is because of movements in this two vehicle per household density ratio
that can really move the needle quite a bit in terms of overall units sold as well as pricing.
And so we decided and determined a while ago that to really understand where the cycle is going,
you need to have a clear view on consumer desires and needs around personal mobility.
And so our survey effectively goes out to people and asks them about their future plans
for vehicles per household, which we then use effectively to work backwards
towards how many new vehicles we will need. Because there are so many moving factors driving
vehicle density up and down at the same time. It's like this arm wrestle you constantly have to
kind of keep tabs on. And we believe that some of the resilience we're seeing today may be tied
to de-urbanization trends that began during COVID. So people leaving cities and therefore
purchasing one, even multiple vehicles in their household, which has partly
been the reason why the automotive end market has proven to be quite resilient relative to these
persistent calls for peak auto that we've seen for quite some time. And our latest survey TD
calendar we published just this past June did show from the survey a continuation of some
of these trends going forward. And when you talk about that de-urbanization trend
continuing, my first instinct is to say I definitely recognize that on an anecdotal
basis even and obviously also reflected in the data from COVID. And at the same time,
I wonder how that trend can continue if you have basically like that first kind of wave of people
moving out of cities into suburbs and I guess into rural areas is you're seeing that continuing
at the same rate or you're seeing it sort of taper off. Can you talk a little bit about
the protections for that de-urbanization trend? It's a great question because every time we run
the survey we always wonder whether the de-urbanization trend will continue. Was it a one-time blip? But
so far having run two surveys at TD Count this year, we're seeing that trend still very much
show up. And so you're right, it's something we have to consistently track because as I mentioned
there's so many moving pieces. I've often been asked is there one trend around vehicle
density and studying this trend for quite some time the answer is not really. There really are a
lot of factors moving up or down. They could shift by region, various age groups. So it is
something we have to continue to monitor of course going forward but as of now it still seems to be
continuing. And of course the outcome of the survey won't only show up in SAR, it could show
up in new and used vehicle pricing. There's a lot of interesting trends that the install
base can help one go in around demand, pickup trucks being one of them over the years. But yeah,
the survey still shows at the de-urbanization trend forecast to continue.
And you were talking earlier about those kind of, I'm thinking about them as anchor vehicles
that sort of keep segment pricing in control because automakers don't want to
sort of be the first to blink is kind of how I'm thinking about it. And I guess what that also means
is that a lot of the automakers are sort of taking the hit when it comes to some of these
tariff price impacts which we've also seen the most recent earning season. Do you see any sort of
trouble on the horizon as automakers are absorbing these tariff costs? In other words,
do you see them kind of losing that appetite or is this just kind of the new normal and the new cost
of doing business? Yeah, with you, it's does a new normal and the cost of doing business. Of course,
one other very interesting trend that's developed in the last few months is the potential for easing
emissions regulations to potentially create significant profit tailings for the automakers.
We've done some work on that as well. And so the tariff certainly to your point of being
largely absorbed right now, of course, it helps it underline consumer auto demand is strong. It does
provide some opportunity to optimize pricing and mix. But also there are these potential tailwinds
that could be in the multi-billion dollar kind of range that the automakers could potentially
enjoy the years ahead if the emissions regulations continue to ease as they've been proposed.
Yeah, so if I hear you correctly, the tariff costs are sort of offset by some of the
more and more lenient emission standards. So I'm thinking about the California waiver being
eliminated through the Congressional Review Act. I'm thinking about the elimination of the
fines for the CAFE standards. Is there one of those that's kind of driving those cost savings
for automakers, or is it just kind of the full picture?
Absolutely. It's all the above. Plus, of course, the EPA proposed rule, which should turn to a
final rule. And we'll have to track that, of course, I think by December. So those were
the three that we're watching most closely, the California, the CAFE fines from the bill
effectively going to zero. And whatever the final rule will come out on greenhouse gas
emissions from the EPA. And so, you know, I think that December timeframe is going to be key and
depending on how that goes, that's likely to drive automaker decisions around product mix,
of course, power train propulsion mix. And with the opportunities really in a lot of different
areas around this, that will take a little bit of time to play out. But yeah, to your point,
that does provide, of course, an offsetting factor to some of the tariffs. And of course,
we'll have to watch to see where tariff rates go from here as well. And so kind of going back,
you know, three months ago, four months ago, where we had a lot of uncertainty with tariffs today,
somewhat less so. And maybe there's some hope that tariff rates ultimately will be lower.
Three months ago, too, there was a lot of uncertainty around demand. And of course,
there is still macro uncertainty out there. But so far, demand is proving to be resilient.
We talked a little bit about the density of trends. They're driving that. And then
three, four months ago, I think there was a very little talk about potentially very
significant profit tailwinds from easing emission regulations. Of course, that now
is right on our radar screens as something that seems increasingly more probable.
I guess when I think about the tariff impacts were positioned as this huge
disruptive force in the auto industry. And I guess it's surprising to me that the costs
of some of these emissions standards were so significant as to sort of form an offset. And
in particular, I'm thinking about the cafe fines. I mean, I understand that
research and development is a very expensive proposition. Battery tech is very expensive.
But I guess I was not aware that the sort of punitive nature of some of these policies
was costing the automakers so much. Given that, and given the sort of interesting kind of political
environment that we're in, the midterms coming up and another presidential election,
fast approaching, do you see automakers sort of making bets about the stability of those
lenient emissions policies?
I think once the final rule from the EPA is clarified and comes out, I think around December
is the target, it does seem like the automakers will base product plans around that. Of course,
there'll be challenges. It's not going to go away from the conversation. But once there is
that final rule, our understanding is the automakers will begin to kind of act upon that. And
so you're right, there's a number of buckets to think about. There's lower compliance costs,
compliance costs, can be fines that could be purchasing on credits. Some of it could be
kind of EV to ICE optimization, but that doesn't mean automakers completely turn their backs
to the EV market. They're still investing. They want to be, of course, very strong players
over time. There's a lot of reasons for that. But there are some short-term
optimization opportunities you could have, if you have easy kind of near-term regulations.
Then there's interesting opportunities to optimize within the ICE market as well.
You can argue from the work that we've done, there's some opportunity even for SAR to move
higher in certain states. And also for more pickup truck demand as well, we still think
there's untapped pickup truck demand out there based on some very detailed analysis that
we've done on the install base. And then also even some trim mix optimization that could be done
on top of that as well. And the last driver, and you mentioned it a little bit too, could be some
reduction in R&D spend. Some of that could be resource, we think, to other projects,
but there could be some flow through that could help profitability as well. So those are some
of the bigger kind of buckets we're thinking about in terms of what the profit tailwinds
potentially could be from this in the years to come.
It's time for Kelly of TD Cowan. Thanks so much for joining us on Daily Drive.
Thank you for having me.
That's Daily Drive for today. I'm Kellan Walker. Thanks to Automotive News executive producer
Jake Neer, as well as our own Lawrence Ilyft for his reporting for today's podcast.
You can get the latest news on tariff impacts, the supply chain,
and everything happening in the auto industry at AutoNews.com.
We'd love to hear from you. Let us know what you think of the show and the topics we cover today.
Send us an email at DailyDrive at AutoNews.com or leave us a voicemail at 313-444-2774.
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