Trump Pushes for New Auto Plants — But Automakers Have Other Plans

"The car factories are coming back," proclaimed U.S. President Donald Trump recently.

He sees this as the result of his tariff policies and takes credit for it. "Right now, so many auto plants are being built or planned," he said. "They're coming from China. They're coming from Mexico." However, in America's industrial heartlands, there is little sign of this. New construction? Nowhere to be seen. Instead, automakers are relying on tactical moves, upgrading or expanding existing plants. Their strategy: bring just enough value creation back to the U.S. with minimal investment to make the pain of tariffs bearable, while also reflecting the U.S. government's policy shift on electric mobility.

Take Nissan, for example: The Japanese automaker has announced plans to ramp up SUV production at its Tennessee and Mississippi plants while reducing imports from Japan. "We're seeing production increased at underutilized factories to reduce the need for imports," explains Sam Fiorani, Vice President at the analysis firm AutoForecast Solutions, describing a typical automaker tactic. "There is no building boom."

Others are redirecting previously announced investments in electric vehicle plants, opting instead to invest in factories for combustion-engine vehicles. This is a response to Trump's policies: the president, who succeeded Joe Biden, has rolled back tax incentives for electric vehicles and is doing little to advance e-mobility. In June, General Motors announced plans to retool a plant in a Detroit suburb to build combustion-engine pickups and an SUV. Back in 2022, GM had pledged several billion dollars to prepare this plant for electric vehicle production.

Many automakers are now reversing course from the expansion of e-mobility that characterized the Biden administration, which had led to a significant increase in investments. According to consulting firm Alix Partners, during Biden's tenure, GM, Ford, Stellantis, Tesla, Rivian, and Lucid together invested about $38 billion annually — nearly twice as much as during Trump's first term.

DIFFICULT DECISION FOR NEW PLANTS

When it comes to building new plants, automakers weigh more than just the policies of the current government. Plants must be profitable for at least the next two decades, while Trump's term will last just over three more years.

The complexity of such decisions is evident in Audi's case. The Volkswagen subsidiary is currently fully dependent on imports from Europe and Mexico for its U.S. business. Tariffs alone cost the company €600 million in the first half of the year. Auto imports from Mexico are still subject to a 27.5 percent tariff. For imports from the European Union, tariffs were retroactively reduced to 15 percent as of August 1. Audi has been considering U.S. production for years. A decision is expected by year's end. Options include building its own plant, or producing Audi vehicles at Volkswagen's Chattanooga facility in Tennessee or at the new Scout brand plant in Columbia, South Carolina. Audi CEO Gernot Döllner said this summer that one scenario is to build vehicles there for the global market. This would allow Audi to catch up with German rivals BMW and Mercedes, both of which build various SUV models in the U.S. and are among the country's largest vehicle exporters.

Nevertheless, White House spokesperson Kush Desai insists there is an investment boom. "Once the unprecedented trade agreements with the European Union, Japan, and others take effect, cars will soon be rolling off Detroit assembly lines and into showrooms in Tokyo, Frankfurt, and Paris," he said. David Adams, president of the industry association Global Automakers of Canada, is more skeptical. "The claim that everyone is pulling out of Canada to produce in the U.S. does not match reality," he said. Ultimately, Trump's tariff policy could indeed reshape auto production in North America. "But we're not there yet."

(Written by Christina Amann, edited by Sabine Wollrab. For questions, please contact our editorial staff at [e-mail] (for politics and economics) or [e-mail] (for companies and markets)

- by Jarrett Renshaw