Uncertainty augmented by President Donald Trump’s tariff policy is “adversely impacting” the auto industry, the CEO of major Canadian automotive supplier Magna International Inc. said Tuesday.
Swamy Kotagiri, speaking at an Automotive Press Association event, likened the circumstances to both the 2008-09 economic downturn and the pandemic-induced microchip shortage in one: He predicted softening demand and production that stops and starts because duties create supply chain instability.
“That’s just the beginning,” Kotagiri said of temporary plant shutdown announcements like at Stellantis NV that already have been made. “Certainty on policy in a time frame is the most important thing for the industry.”
Trump earlier this month imposed 25% tariffs on vehicles imported into the United States, and 25% tariffs on certain auto parts are expected to go into effect May 3. Trump insists the import taxes will increase U.S. production, create well-paying manufacturing jobs and raise federal revenues to lower taxes and reduce national debt.
But at least for Magna, Kotagiri said the tariffs haven’t shifted the long-term strategy of the manufacturer of seating, advanced driver-assistance systems, chassis, powertrains and more — at least “not yet,” he said.
“We have the footprint in all regions,” he said. “Although it’s not very easy to change very quickly, there is a possibility, and we are having conversations with the OEMs — how they are changing their plans. We are at the table with the policymakers to offer facts and data and the possible implications, and hopefully looking for a clear objective in the long term.”
But even if the Trump administration identified such a target, it won’t happen without “substantive short-term pain,” Kotagiri said.
Magna has 140 manufacturing facilities and more than 73,000 employees throughout Canada, Mexico and the United States. That includes 12,300 people in Michigan. To build a brand new plant from breaking ground to opening would be around two years after permitting, Kotagiri said.
Canada has retaliated with 25% tariffs on vehicles imported from the United States. Kotagiri said he sees this as a short-term response to the circumstance but that it won’t help the situation.
Tariffs, however, are not the only contributor to uncertainty for the industry. Frequent fluctuations in production forecasts by automakers, particularly for electric vehicles, are creating expensive inefficiencies that need to be addressed, Kotagiri said. Automakers, he said, were forecasting global vehicle production at 120 million last year and only produced 80 million. He characterized the new normal for the run rate of new vehicle launches at 33% of original expectations.
“The uncertainty that we have, it’s at an all-time high,” he said. “And we are seeing standard productions being delayed. Programs are being canceled after the investments have been made. Volumes are being reduced after the capacity is installed, and the OEMs are hedging against adaption risks for both ICE and EV.”
He emphasized the the industry must move to greater collaboration, systems engineering that simplifies products like those of startup competitors, and sharing components between vehicles of differing powertrains and platforms to create mass parts production to lower costs.
“We might have to think a little bit differently today than we have done in the past,” Kotagiri said. “Our industry thrives on scale, and we have to get back to that, and we have to look at partnerships.”
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