Analysis by Julie Dautermann, Competitive Intelligence Analyst

This update helps automotive suppliers inform their legal and operational decisions to help address challenges and opportunities.

Key Developments

• The most recent article in Foley & Lardner LLP’s Auto Trends 2023 Series provides an overview of key disruptors automotive suppliers are likely to encounter in the near term, as well as strategies to mitigate or even benefit from certain market developments.  Click HERE to subscribe to the series.

• U.S. new light-vehicle sales volumes in April reached 1.36 million units, and results were comparable to pre-pandemic levels, according to an update from LMC Automotive.  The analysis also notes consumers are encountering higher inventory levels and rising incentives.  However, average transaction prices remain elevated and vehicles have longer wait times.

• A number of analysts quoted in Bloomberg predict automakers will experience downward pressure on prices in certain regions in the months ahead, particularly for mid-range buyers, due to the effects of diminished supply chain constraints and a softening economy.

• The National Automobile Dealers Association's 2022 NADA Data report predicts U.S. new light-vehicle inventory will reach 2.2 million units by the end of 2023, up from 1.7 million units at the end of 2022 and 1.1 million units at the beginning of 2022.

• UAW president Shawn Fain indicated that raising wages in battery plants will be a key priority during upcoming contract talks with automakers.

• Reuters reports Stellantis and LG Energy Solution could implement “contingency plans” for an upcoming battery plant in Canada, due to complications with anticipated funding from federal and provincial governments.

• Foley & Lardner Partner Craig Dillard is quoted in the Yahoo Finance article, “Americans Aren’t Buying EVs Despite Tax Cut: Here’s Why,” discussing how the high demand for lithium, an essential raw material for electric vehicle (EV) batteries, can make the price of EVs cost-prohibitive for consumers despite the tax incentives included in the 2022 Inflation Reduction Act.

• Generation Z’s current disinterest in vehicle ownership could be short-lived, and long-term purchasing preferences may eventually be similar to those of previous generations, according to analysis from Foley & Lardner.

OEMs/Suppliers

• The Detroit Three automakers reported strong results for first quarter revenue and vehicle shipments. However, Ford CFO John Lawler expressed caution regarding the company’s full-year earnings outlook due to uncertainty around issues including rising incentives, elevated commodity prices, and the outcome of upcoming UAW contract negotiations.

• Toyota set a global production target of 10.1 million vehicles for its current fiscal year ending March 31, 2024, up from its previous fiscal year production of 9.13 million units, according to guidance the company provided on May 10.

• Ford is reported to be temporarily holding shipments of certain gas and electric F-150 pickup trucks produced at three U.S. plants due to a supply chain issue with door handles.

• The Wall Street Journal reports major tire manufacturers are examining ways to integrate sensors which gather and relay data about driving conditions and road friction in real-time for autonomous vehicles, while noting the technology has a number of technical challenges to overcome.

• Qualcomm will acquire Autotalks Ltd., an Israel-based fabless semiconductor company devoted to vehicle-to-everything (V2X) communications.  Terms of the deal were undisclosed.  

Electric Vehicles and Low Emissions Technology

• BorgWarner CEO Frédéric Lissalde discussed the company’s electrification capabilities and strategy in an interview with Crain’s Detroit (subscription).

• Increased production of electric vehicles may provide opportunities to large Tier 1 suppliers with strong engineering capabilities to “bring in more of a complete solution” to OEMs, according to commentary in Crain’s Detroit (subscription).

• Analysis from S&P Global Mobility predicts automotive suppliers will experience significant “displacement and disruption” if they are unprepared for the industry shift from internal combustion engine-based vehicles to electric vehicles.

• Toyota plans to invest 5 trillion yen ($37.2 billion) in electric vehicles by 2030, up from a previous target of 4 trillion yen ($29.8 billion).

• Issues which may contribute to EV range limitations include sudden stops, frequent braking, driving against strong wind, use of the heater or air conditioning, and loading the vehicle with passengers or luggage, according to a report in Bloomberg.

• A number of companies announced project updates at the Advanced Clean Transportation (ACT) Expo held in Anaheim, CA this month:Daimler Truck North America debuted a Freightliner medium-duty electric truck for pick-up and delivery applications, and production is expected to begin later this year in Portland, Oregon.

  • Toyota and PACCAR announced an expanded agreement to develop and produce Kenworth and Peterbilt trucks powered by Toyota’s hydrogen fuel cell modules, with initial customer deliveries beginning in 2024.

  • Navistar and infrastructure firm Quanta Services, Inc. will provide vehicle and charging infrastructure solutions to assist fleet customers in the implementation of battery-electric vehicles.

  • Hyundai plans to deploy 30 Xcient Class 8 hydrogen fuel cell electric trucks in northern California beginning later this year.  The initiative is part of the NorCal ZERO public-private partnership to support the use of fuel cell electric trucks.

• The U.S. Environmental Protection Agency issued a request for information on the availability of zero-emission technologies in the heavy-duty vehicle and port equipment sectors, and their respective fueling infrastructure needs.  The purpose of the feedback is to inform the agency prior to its moving forward with Inflation Reduction Act funding for eligible recipients.  Comments must be received on or before June 5, 2023.

• Bloomberg reports South Korea’s top battery makers – LG Energy Solution, Samsung SDI and SK On – plan to increase capabilities in lithium iron phosphate (LFP or LiFePO4) batteries to enhance market competitiveness and respond to customer demand.  Adoption of LFP batteries is expected to increase, amid efforts to lower the costs of raw materials and reduce the use of certain commodities such as cobalt.

• Tesla broke ground on its first lithium refinery in Robstown, Texas, and the facility is expected to begin operations in 2024.

• Electric SUVs and crossovers are one of the fastest-growing segments in China, and intensified competition will impact automakers’ vehicle prices and profit margins in the nation, according to a report in Reuters.

• Vietnam-based electric vehicle maker VinFast intends to list in the U.S. through merger with special purpose acquisition company (SPAC) Black Spade Acquisition Co.

• The Wall Street Journal reports rising sales of EVs are expected to impact the volume, cost and type of components needed in automotive repair.  The article notes EVs have not been in use long enough to fully assess the future landscape.

Automated, Autonomous or Connected Vehicles Technologies

• Waymo plans to expand the service areas of its existing autonomous taxi operations in Phoenix and San Francisco.

• GM business unit Cruise plans to begin testing autonomous taxis in Houston and Dallas, with a safety driver in the vehicles. Cruise is currently testing or operating its vehicles in San Francisco, Phoenix and Austin.

• State lawmakers in California advanced a bill (AB 316) which could prohibit autonomous heavy-duty trucks from being tested or commercially operated on public roads unless a human safety driver is present in the vehicle.  The bill’s next hearing is scheduled for May 18.

Market Trends and Regulatory

• S&P Global Mobility reports the average age of cars and light trucks in operation on U.S. roads has risen to 12.5 years.  According to the analysis, this represents the sixth consecutive year of increase in average vehicle age, and the biggest yearly increase since the 2008-2009 recession.