this post was submitted on 15 Sep 2023
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Won't automakers be moving their production lines aboard as result ? There are companies that moved production abroad to reduce costs or/and not have to care about working conditions. Just saying.
Thanks to the chicken tax, they'll have to keep some manufacturing in the USA. Maybe this will be what finally kills it.
Considering less than a sixth of a vehicle's input cost is labor, they could double their pay and still make 25% more profit than what it would cost for truck import taxes...
They could but they are after maximizing profit. Why else would be corporates moving their factories to the other end of the world? To give poor people a job? Or to reduce costs because domestic labour is much more expensive?
If we're still talking about trucks, you would need to find some place where not only do you pay them less than what someone would make in a Chinese vehicle manufacturing plant, you also need to make sure that shipping and getting the right materials doesn't eat into that savings. It just isn't really economical anymore, unless you find more and more obscure countries with more instability and less infrastructure.
Managers of these companies are good at doing that and are richly rewarded for doing so. Instead of China it might be other cheap labor place like Vietnam, India or even eastern Europe.
Just take Ford as example, they made trucks in Turkey, imported trucks as passenger vehicles to get around chicken tax, de-mounted passengers seats in states to sell it as protected trucks.
Eventually they got caught. But do you think they would to this gray business if it wasn't profitable ?
Even if we look at it as having $1.3 billion USD "loan" without a mortgage, because they eventually had to pay back these taxes, it's still profitable because these $$$ allowed them to build more and sell more in less time + they saved costs on cheap labor.
Ain't the chicken tax already being evaded by Ford making trucks in Turkey ?
They kinda already did, the big automakers fighting unions are arguably what caused Detroit's current situation. I wonder if they can outsource even more or if they're stuck for some reason.
It's not a case of being "stuck" per se. It's just not cost effective to move production on this kind of stuff overseas. Shipping goes by volume, and cars have an absolutely atrocious cost to volume ratio (think about how many dollars worth of iPhones you could stuff into the space occupied by a single car). It makes a lot more sense to build them where you plan to sell them (broadly speaking). That's why a lot of car manufacturing still happens in countries like the US, Canada, and the UK.
Not disagreeing, but isn't there also protectionist incentives to at least assembly them in the US too? Benn a while since I remember reading it, but seem to remember there are many tarrifs, tax incentives, and etc that make it a complex situation for auto makers.
I believe you are very likely correct about that, but I wouldn't want to say for sure without doing some digging.
This isn't the most substantive of your comments in this chain, but I think it deserves some attention. It's perfectly worded and it's a concept more people need to embrace: you don't have to speak in absolutes and it's okay to express the limits of your knowledge.
Chicken tax is an example.
It's what they are good at, comparing costs and maximizing profits.
They will find the way to get around it at least partially even if they have to invest into fully automatic production with limited human labor.