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Tariff Concerns Overshadow Tech and Auto Innovation at CES 2025

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As CES 2025, one of the largest tech and auto trade shows, prepares to open in Las Vegas from January 7 to 10, an unusual topic is dominating discussions: tariffs. With President-elect Donald Trump’s inauguration days away and his proposed tariffs on imports from countries like Canada, Mexico, and China looming large, attendees are bracing for tough questions about potential economic fallout.

The trade show, known for unveiling cutting-edge automotive technology, quirky gadgets, and advancements in artificial intelligence (AI), is now becoming a platform to address the cost challenges posed by tariff threats. Strategy consultant Deborah Weinswig, CEO of Coresight Research, noted that the issue has surfaced in nearly every pre-CES conversation with clients.

Tariffs and Supply Chains in the Spotlight

Companies showcasing their latest innovations are likely to face scrutiny over their supply chains and manufacturing processes. Analysts predict questions about whether businesses are considering moving production to the U.S. to mitigate tariff impacts—an expensive and time-intensive solution.

For instance, Honda, which sends 80% of its Mexican vehicle output to the U.S., has already warned it may need to shift production if permanent tariffs are imposed. According to Edmunds, nearly half of new cars sold in the U.S. are made abroad, along with a substantial share of parts in domestically assembled vehicles. S&P Global estimates that European and American automakers could lose up to 17% of their combined annual core profits if tariffs are levied on imports from Europe, Mexico, and Canada.

Economic Strain on the Auto Industry

In addition to tariff concerns, the auto industry faces challenges from weaker-than-expected demand for electric vehicles (EVs). Trump’s plans to roll back policies promoting EV adoption further compound the difficulties. Felix Stellmaszek, an automotive expert at Boston Consulting Group, emphasized the precarious position of suppliers operating on razor-thin margins. The combination of tariffs, supply-chain uncertainties, and labor shortages has pushed companies into “hyper mode” for scenario planning.

Focus on Tech and AI Innovations

Despite economic uncertainties, CES 2025 remains a showcase for advancements in AI, self-driving technology, and software-driven automotive enhancements. Keynote speakers, including Nvidia CEO Jensen Huang and Volvo Group CEO Martin Lundstedt, are expected to unveil innovations that aim to make vehicles smarter, safer, and more efficient.

However, discussions surrounding tariffs are expected to dominate policy sessions, press conferences, and informal talks. Industry leaders such as Toyota, Bosch, and Continental are also expected to provide updates on how they are adapting to rising costs and preparing for potential policy shifts.

A Complex Outlook

The intersection of technology and economic policy is shaping CES 2025 in unprecedented ways. Questions remain about how companies can collaborate across supply chains, mitigate rising costs, and leverage technology to navigate uncertainty. “There’s still so much that’s unknown,” Weinswig remarked. “Everyone is trying to figure out every possible scenario.”

Tesla Achieves Record China Sales in 2024 Amid Global Decline

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Tesla’s performance in China hit a new high in 2024, with sales rising 8.8% to over 657,000 vehicles, even as global deliveries fell for the first time in the company’s history. In December, Tesla China recorded its highest monthly sales of 83,000 units, marking a 12.8% increase from the previous month. China accounted for 36.7% of Tesla’s total deliveries, solidifying its position as the company’s second-largest market.

Despite Tesla’s strong performance in China, global deliveries slipped by 1.1%, falling short of CEO Elon Musk’s earlier prediction of slight growth. Contributing factors included a 24% drop in exports from China, reduced subsidies in Europe, increased competition from Chinese EV makers like BYD, and a growing U.S. preference for lower-priced hybrid vehicles.

Tesla’s Shanghai plant, the company’s most productive factory, saw a 3.3% decline in sales of its China-made Model 3 and Model Y vehicles, including domestic and export markets. Total exports from China fell to 260,000 units, the lowest since 2021. Exports to Europe were particularly affected by the EU’s subsidy investigation into Chinese EVs, resulting in an October tariff of 7.8% on Tesla cars from China.

China Leads Global EV Growth

China remained the only major market with robust EV growth in 2024, accounting for 70% of global EV and hybrid sales. Over 90% of the increase in global EV sales originated in China, underscoring the country’s dominance in the electric vehicle sector. John Zeng, head of market forecasting at GlobalData, noted that China’s growth starkly contrasts with stagnation or decline in other markets.

Tesla maintained a narrow lead in global sales, delivering 1.79 million cars, just ahead of BYD’s 1.76 million units. However, BYD outpaced Tesla in growth, with a 12.1% increase in EV sales globally and a 41% surge in total passenger vehicle sales, reaching over 4.25 million units. BYD’s overseas sales rose 71.9% to 417,204 units, though it fell short of its 450,000-unit export target due to a 17% EU tariff.

Tesla’s Strategic Adjustments

Amid fierce competition and an ongoing price war in China, Tesla has extended a 10,000-yuan ($1,369.99) discount for loans on its Model Y and offered zero-interest financing for up to five years on some Model 3 and Model Y cars. These incentives aim to maintain Tesla’s competitive edge in a market dominated by aggressive cost-cutting strategies from rivals like BYD.

Challenges and Investigations

Tesla downsized its global workforce in response to declining demand and heightened competition. Similarly, BYD faced challenges, including an investigation by Brazilian authorities into the working conditions of Chinese laborers at a construction site for a BYD factory in Brazil. Nearly 20% of BYD’s overseas sales came from Brazil, highlighting its importance as a growing market despite these setbacks.

 

Carlos Ghosn Warns of “Carnage” for Nissan in Honda Merger

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Carlos Ghosn, the former CEO of Nissan, has raised concerns about the potential consequences of a merger between Nissan and Honda, predicting that Nissan would bear the brunt of the cost-cutting measures. In an interview with CNBC, Ghosn expressed his belief that Honda would take control in the merger, which he described as “sad” considering his long tenure at Nissan. He emphasized that there is little complementarity between the two automakers, and any synergies would likely come through cost reductions and duplication of plans and technologies, which would harm Nissan, the “minor partner.”

Ghosn, who led Nissan for 19 years and was instrumental in its growth, criticized the lack of alignment between Nissan and Honda, suggesting that the merger would lead to significant layoffs and operational cuts at Nissan. He also pointed out that Nissan’s former partnership with Renault offered more complementarities, implying that the Nissan-Honda merger was not as strategically sound.

The merger speculation gained traction earlier this month, and both companies confirmed their talks on Monday. The proposed merger would result in a $54 billion entity, with Honda assuming the dominant role due to its significantly larger market capitalization. If successful, the combined group would become the world’s third-largest automaker, surpassing Hyundai. However, both Nissan and Honda executives have stressed that the merger would create economies of scale, particularly in the electric vehicle (EV) transition, and deliver long-term profitability.

Despite these assurances, concerns remain about the merger’s viability. Nissan is undergoing a major restructuring, which includes cutting production capacity and laying off 9,000 employees, while Honda’s CEO acknowledged that some shareholders may see the deal as a form of support for Nissan’s struggles. Ghosn suggested that Nissan’s move towards the merger indicated a sense of desperation, as the company appears unable to resolve its issues independently.

Investor reactions have mirrored these concerns. Kei Okamura, a portfolio manager at Neuberger Berman, noted that while the merger’s long-term vision seems promising, the integration process would be crucial to its success. He emphasized the uncertainty around the merger’s execution, particularly the challenges of integrating the companies’ assets, cultures, and people. Okamura also noted that the deal could fall through if Nissan’s restructuring efforts fail to yield results.

Both Nissan and Honda have declined further comment on Ghosn’s statements or the merger plans.