Hey, good news, everyone. That new car you're thinking about buying? You know the one—maybe it's electric, maybe it's not. It doesn't really matter what's under the hood, because it's about to get more expensive regardless.
And no, it's not because every automaker suddenly decided to add a premium feature or nappa leather to their cars. No, this time it's tariffs. Again.
Welcome back to Critical Materials, your daily roundup for all things electric and tech in the automotive space. Today, we get a not-so-great warning from Lucid's CEO about the price of new cars. Plus, Elon Musk's corporate umbrella is getting ready to make it rain on xAI and Hyundai will ride out the tariffs by giving the rest of the world cheap cars. Let's jump in.
30%: Lucid CEO Warns Every Single New Car Is About To Get More Expensive And You Know Why
Lucid Motors' interim CEO Marc Winterhoff has issued a stern warning: the return of Trump-era tariffs are going to slap higher costs on every new car out there.
That caution doesn't just apply to made-in-China EVs or Canadian-built pickups, either. It's every car, regardless of whether it's made in Beijing or Birmingham (Alabama or England—take your pick, because it doesn't matter).
Every single new car out there is doomed to go up in price, according to Winterhoff's comments made to Bloomberg this week. Here's what Bloomberg has to say about Winterhoff's prediction:
The industry’s global supply chain means domestic manufacturers still have to import raw materials and some parts from other countries, interim Chief Executive Officer Marc Winterhoff said in an interview with Bloomberg Television on Monday.
“For the American consumers, vehicles are going to be more expensive under the tariff regime. There’s no other way around it,” Winterhoff said. “There’s a reason the supply chain is so global.”
As Lucid's CEO points out, modern car making isn't local. It's an elaborate, global dance of components and minerals that make up your new computer-on-wheels. That means that even if your EV rolls off the line in Texas or Ohio, the chances are that its guts of graphite, lithium and semiconductors came from all over the world are pretty high.
Lucid isn't the first automaker to sound the alarm—it's just the latest.
Still, automakers and suppliers have managed to limp by thus far. Auto executives warned in the past that enacting tariffs on the entire auto manufacturing segment would send it to a screeching halt within a matter of weeks. Yet three months later, the wheels of industry are still turning. So what happened?
Well, the industry has been able to use its existing pandemic-era supply chain preparations (and supplier relationships) to figure out how to kick the can down the road. But most important are the tariff exemptions that have been like a get-out-of-jail-free card for many brands.
That didn't mean that things didn't get worse for automakers, but it does mean that automakers have been able to absorb the shock by trimming features and shifting incentives.
Automotive News explains:
A further exemption was made for American-made parts within Canadian- and Mexican-made vehicles. The 25-per-cent U.S. duty is charged only on non-American content within finished vehicles, lowering the overall impact of the tariffs on vehicles shipped into the United States from Canada and Mexico.
The exemptions were vital for many parts suppliers, for whom direct tariffs would have been “a bridge too far,” said Michael Robinet, vice-president of forecast strategy at S&P Global Mobility.
While Robinet is not convinced the tariffs, even if fully implemented, would have fully shut down the industry, he said they would have made production far more difficult and put a serious financial squeeze on suppliers.
“Early indications were yes, we would have had some supply disruptions, but the fact that it didn’t trickle down to the supply base as badly as we expected with the way that the tariffs have been set has been a reprieve.”
The lemon is running out of juice. Automakers have been squeezing and squeezing, and that fruit is looking more like a Lemonhead candy than something you'd garnish a fresh summer drink with. Basically, automakers have less wiggle room than ever in their profit margins and that's going to start eating into other areas of the business.
Research and development, for example, is expected to take one of the biggest hits. In fact, legacy automakers and new brands alike are expected to see strategic planning being one of the weakest areas over the next decade, while new programs take the bench in favor of policy adherence and cost-cutting.
So if you thought China was ahead today, just wait until tomorrow.
60%: Musk's Corporate Umbrella Is About To Make It Rain On xAI
Elon Musk, a big fan of super groups, could be getting ready to pull off yet another giant corporate crossover. Both Tesla and SpaceX are reportedly mulling over whether or not to invest billions into his artificial intelligence arm, xAI.
For those not familiar, xAI was founded and is headed by Musk. It's his answer to OpenAI (which he also co-founded) just with less Sam Altman and more unhinged comments about Adolf Hitler. The company has since apologized for the issues that led to its AI, Grok, posting anti-Semitic comments, and said that the chatbot's code has been fixed.
According to Musk, Tesla will soon hold a shareholder vote to determine whether or not it should invest into Musk's other brainchild—and it's not the only Musk company that's considering it, either.
According to another report from the Wall Street Journal, Musk's SpaceX has apparently already agreed to invest $2 billion into xAI as well, marking the first official move in the Musk corporate umbrella to officially agree to cut a check to the tech company. From the WSJ:
Elon Musk’s SpaceX has agreed to invest $2 billion in his artificial-intelligence company xAI, investors close to the companies said, nearly half of the Grok chatbot maker’s recent equity raise.
Musk has repeatedly mobilized his business empire to boost the AI startup, which is racing to catch up with OpenAI. Earlier this year, he merged xAI with X, combining what was a small research lab with a social-media platform that helps amplify the reach of its Grok chatbot. The merger valued the new company at $113 billion.
The SpaceX investment is part of xAI’s $5 billion equity fundraise announced by Morgan Stanley last month. It is the rocketmaker’s first known investment into xAI and one of its largest in another company.
It's worth noting that an investment in an outside firm is very rare for SpaceX. In fact, the last major investment was the acquisition of Swarm Technologies for $524 million in 2021. Now, with an estimated $3 billion in cash on-hand, SpaceX reportedly agreed to invest $2 billion into xAI—though it's not clear of the exact terms as of yet.
As for Tesla, well, that feels like an all but done deal, less a formal vote.
Musk noted that if it were up to him, Tesla would have invested in xAI "long ago." Some investors believe that Tesla's involvement could signal the first stages of a buy-out. Musk says that he does not support a full merger between Tesla and xAI; however, some analysts like Wedbush's Dan Ives (who Musk recently told to "shut up" after he called for more board governance of the CEO) believe that this investment would be a logical first step to set that stage.
The company's AI chatbot, Grok, was integrated into Musk's social media platform X (nee, Twitter) prior to its acquisition by xAI. Now, Grok has also made its way into Tesla vehicles with the company's latest software update.
Whatever the future holds for xAI and Musk's corporate umbrella, it probably comes without saying that the company needs to tread carefully. Tesla has gotten in some hot water before with the acquisition of Solar City, which was largely regarded as a bailout for Musk's cousins who founded the company. Ultimately, Tesla and Musk were cleared of any wrongdoing, but not before a long legal battle.
90%: Hyundai and Kia Plan To Ride Out Tariffs By Giving The Rest Of The World Cheap EVs
Hyundai and Kia are getting ready to shower the world with a fantastic gift: cheap EVs. Well, most of the world, anyway. Sorry, U.S., you're not getting in on this one.
According to the Korean outlet Newsis, the plan for both automakers is simple: keep cranking out cheap EVs like the Hyundai Casper Electric, aka the Hyundai Inster. In fact, build more of them and sell them in countries where these models can easily crack loads of sales and not be roadblocked by tariffs and manufacturing issues.
In the U.S., they don't expect to lose market share thanks to demand for hybrid cars. And here, they will focus on volume sales and local production. The momentum is good lately, so there's no reason to stop. Via Reuters:
Hyundai's North American revenue was the highest in almost a decade last year. Kim Chang-ho, an analyst at Korea Investment & Securities, estimated it generates around 60% of its profits from the U.S., thanks to higher vehicle prices.
Mocked in the U.S. in the 1980s for its perceived shoddy quality, Hyundai doubled down there around a decade ago, especially after tensions between Beijing and Seoul and the rise of domestic EV makers saw it start to lose ground in China.
"After years of putting in effort, our brand is finally gaining recognition in the United States," one of the Hyundai insiders said. "So we will not take our hands off the U.S."
I think it's important to note here that Hyundai and Kia are still doing their best in the U.S. In fact, a number of their vehicles recently made our list of best EVs to buy before the tax credit goes away. With any luck, they'll continue expanding with the more affordable electric options they've shown us, like the EV3 and EV4.
100%: What Feature Would You Delete From Your Car To Save Money?
Hello there, future CEO. Welcome to your first day on the job here at Fake EV Startup, Incorporated. We're so glad you're here, because these tariffs have been tough, and we're not sure how else to stay afloat without raising prices.
We heard that you had a great idea to cut out a feature from our new cars to save money. What was it again? Could it have been heated seats? What about that big infotainment screen? Or, wait, I might remember now—it was to completely strip down the paint and build every panel out of plastic, wasn't it?
Anyway, I'll stop putting ideas in your head, because we're all eager to know. Tell me in the comments so I know what to tell the engineers to start working on immediately.
