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

Key Developments

• U.S. new light-vehicle sales in July are forecast to reach a SAAR of 15.0 million to 15.2 million units, according to estimates from J.D. Power and LMC Automotive, and Cox Automotive, respectively.

• Ford, Volkswagen and Nissan increased full-year earnings guidance based on the strength of second-quarter earnings reports.

• GM extended downtime at five North American plants in Michigan, Tennessee, Kansas and Mexico due to the chip shortage.

• Ford returned to a mandatory mask requirement regardless of vaccination status for its facilities in Missouri, Florida and Kentucky due to rising COVID-19 cases, and the automaker will now require U.S. employees to be fully vaccinated for COVID-19 prior to international business travel. Stellantis resumed a mask requirement for its facilities in Illinois and Indiana.

• The U.S. Senate revealed a bipartisan infrastructure bill that that would authorize roughly $1 trillion in spending over eight years; the bill is headed for debate in the Senate.

• The Biden administration could release updated fuel-efficiency standards for new light vehicles as soon as this week.

• U.S. Rep. Debbie Dingell (D-Michigan) introduced a bill intended to address the effects of the microchip shortage on the auto industry by investing $2 billion on domestic semiconductor manufacturing for mature technology nodes.

• Companies including Disney, Walmart, Facebook and Google have recently announced COVID-19 vaccine requirements with varying timetables and impact on their workforces; most large manufacturers have thus far not mandated vaccines, according to The Wall Street Journal.

• Uber, Twitter, Google, Apple and Netflix are among the companies delaying planned returns to in-person work due to the spread of the delta variant. Much of the San Francisco Bay Area will return to indoor mask mandates this week regardless of vaccination status.

• Electric vehicles and low emissions technology:

  • According to Bloomberg, the Biden administration is in the early stages of discussions with the UAW and automakers to commit to a 2030 sales target for EVs; no details have been confirmed, but unnamed sources speculate the target could be as high as 40%.

  • Ford COO Lisa Drake said its capital expenditures on electric vehicles will surpass internal combustion engine vehicles by 2023; the automaker previously announced that EVs will represent 40% of its global sales by the end of the decade.

  • Tesla produced over 206,000 vehicles, exceeding a quarterly profit of $1 billion for the first time in the company’s history in its Q2 2021 earnings results from April – June.

  • Hyundai and LG Energy Solution announced plans to form a 50/50 joint venture that will invest $1.1 billion to build a battery cell plant in Indonesia, with construction scheduled to be completed in the first half of 2023.

  • Ford selected Romulus, Michigan, as the site of its previously announced “Ion Park” global battery center. The automaker will invest $100 million to refurbish an existing 270,000-square-foot facility that will employ up to 200 engineers. The site has received tax breaks through a “renaissance zone designation” from the Michigan Economic Development Corp.

Market Trends and Regulatory

• J.D. Power and LMC Automotive forecast total new-vehicle sales in the U.S. to reach 1.31 million units in July, representing a 2.7% increase from July 2020 and a 12.4% decrease from July 2019, with the decline attributed to weak fleet sales.  The seasonally adjusted annualized rate (SAAR) for total new-vehicle sales is projected to be 15.0 million units, representing an increase of 0.4 million units from July 2020, and a decrease of 1.9 million units from July 2019.  The same forecast notes that inventory constraints have weakened the pace of U.S. retail sales, but persistent strong demand is expected to increase average transaction prices above $41,000 for the first time. Cox Automotive predicts U.S. new light-vehicle sales will reach 1.33 million in July, representing a SAAR of 15.2 million units, down from 15.4 million units in June.

• The Biden administration issued a proposal to require a higher level of American-made products in the “Buy American” program for government procurements. Under the proposal, products procured by federal agencies would increase to 60% from a current level of 55% American-made parts, with the requirement increasing to 65% by 2024 and 75% by 2029.

• A report released last week by the American Automobile Association found that in-dash fuel economy displays in tested vehicles were off by an average of 2.3%, noting that drivers take an "unnecessary risk" if they overly rely on the “miles-to-empty” displays.

• According to the U.S. Energy Information Administration (EIA), U.S. CO2 emissions from energy consumption decreased by 11% in 2020, reflecting the largest annual decrease on record, as the COVID-19 pandemic reduced mobility and economic activity. The EIA noted that CO2 emissions are forecast to increase by 7% in 2021.

OEMs/Suppliers

• Production impact of the semiconductor shortage –  GM extended downtime into the week of August 2 for Lansing Delta Township Assembly in Michigan, Spring Hill Assembly in Tennessee and Ramos Assembly in Mexico, and through the week of August 16 for San Luis Potosi Assembly in Mexico; the four plants have been down since the week of July 19.The automaker also added four weeks of downtime to its Fairfax Assembly plant in Kansas; this plant will resume limited production the week of September 20, and has been down since the week of February 8.The automaker intends to resume pickup truck production the week of August 2 at Flint Assembly plant in Michigan, Ft. Wayne Assembly plant in Indiana and Silao Assembly plant in Mexico.

  • Stellantis will stop production of the Jeep Gladiator pickup truck at its Toledo South Assembly Plant in Ohio the week of August 2, marking the first time this vehicle has been impacted by the chip shortage.

• Toyota will suspend production at two Japanese plants for an unspecified number of days as rising COVID-19 cases in Southeast Asia disrupt parts supplies. Last month, the automaker stopped production for several days at three plants in Thailand due to the impact of COVID-19 cases on one of its local suppliers.

• Ford, Volkswagen and Nissan raised full-year earnings outlooks after reporting profitable second quarter financials: Ford reported a second quarter profit of $561 million due to strong demand, lower incentives, and a favorable mix of more profitable vehicles; the automaker increased full-year earnings guidance to $9 billion to $10 billion, from a previous forecast of $5.5 billion to $6.5 billion. Volkswagen Group expects its adjusted operating return on sales to rise to between 6% and 7.5%, from a previous guidance of 5.5% to 7%; while noting that the impact of the semiconductor shortage is expected to be “more pronounced” in the third quarter. Nissan expects an operating profit of 150 billion yen ($1.4 billion) for the fiscal year ending March 2022, up from a previous guidance that it would break even.

Connected/Autonomous Vehicles and Mobility Services

• While progress is expected to continue in the development of autonomous vehicles, some in the industry are predicting the near-term focus will shift from full autonomy to advanced driver-assistance systems (ADAS).

• U.K.-based autonomous vehicle company Arrival announced it has successfully completed a test run of its automated driving system at an unnamed parcel facility.

Electric Vehicles and Low Emissions Technology

• In its most recent earnings results, Tesla suggested that production of its Cybertruck pickup could be delayed as a result of the chip shortage, noting that the global semiconductor shortage and port congestion were key supply chain challenges in the second quarter.

• The founder and former head of EV startup Nikola Corp., Trevor Milton, has been charged with two counts of securities fraud and one count of wire fraud for misleading investors about the company’s products and capabilities.

• Hyundai is planning two demonstration projects of more than 30 of its hydrogen fuel-cell electric heavy-duty trucks in California. The vehicles are based on Hyundai’s Xcient Fuel Cell truck, which is scheduled to launch in the second quarter of 2023.

• Tesla agreed to pay $1.5 million to settle claims that a software update for over 1,700 Model S vehicles that was intended to reduce the risk of battery fires also reduced the vehicles’ battery range.