Foley Automotive Update - May 2024

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

Key Developments

• U.S. new light-vehicle sales are projected to reach a SAAR of 16.1 million units in May, according to a joint forecast from J.D. Power and GlobalData. This would be an increase of 0.5 million units from May 2023.
• Foley & Lardner provided key takeaways on potential supply chain impacts resulting from recent tariff increases in Mexico.
• China indicated it could implement tariffs as high as 25% on imported vehicles with large engines.
• Canada is considering raising tariffs on Chinese-made EVs, according to a report in Bloomberg.
• Automakers and suppliers are rethinking supply chain strategies amid risks that include high labor costs, tariffs and EV sales uncertainty, according to a report in Automotive News.
• Crain’s Detroit reports Ford and GM revised site plans for previously announced large EV factories in Michigan.
• Ford asked its suppliers to develop cost-reduction proposals for the automaker’s EVs, according to a report in Crain’s Detroit. Ford’s EV unit lost $1.3 billion in the first quarter of 2024.
• Bipartisan groups of lawmakers in the U.S. House and Senate each introduced legislation intended to overturn the Treasury Department’s EV tax credit rules. The Treasury released final rules earlier this month that will provide automakers with an additional two years to secure certain difficult-to-source battery minerals.
• A number of Chinese EV manufacturers are taking longer to settle payments with suppliers, suggesting potential financial strain, according to a report in the South China Morning Post.
• A U.S. Senate inquiry found three automakers may have sourced components from a company that was under an “explicit import ban” over Chinese forced labor concerns, according to a report in The Wall Street Journal. 

OEMs/Suppliers

• With the exception of Ford, the automakers tracked in Plante Moran’s annual North American Automotive OEM Supplier Working Relations Index (WRI) Study improved their scores from one year earlier. Toyota again ranked first in the study, while Stellantis remained in last place.
• Ford recently launched a new supplier program, according to an interview with the automaker’s chief supply chain officer in Automotive News.
• Toyota is considering investing over $500 million to expand its plant in San Antonio, Texas. The facility produces the Tundra pickup truck and Sequoia SUV.
• AutoTech: Detroit (previously TU-Automotive Detroit) will return June 4-6, 2024 at the Suburban Collection Showplace in Novi, Michigan. The event emphasizes networking opportunities and discussion on topics that include vehicle connectivity, software-defined vehicles, design and electrification.
• Magna plans to invest nearly $40 million across three sites in suburban Detroit, aided in part by incentives from the Michigan Economic Development Corp.

Electric Vehicles and Low Emissions Technology

• Nikkei Asia reports Chinese EV makers that include BYD have increased vehicle shipments to Mexico and Brazil ahead of tariff increases and other potential trade restrictions. A number of Chinese EV makers are expected to localize production where possible and continue to pursue growth in markets outside of the U.S., following a decision by the Biden administration to implement a tariff of 100% on Chinese EVs.
• Automotive News provided an overview of major automakers’ production plans for plug-in and conventional hybrid vehicles.
• GM plans to offer plug-in hybrids for the North American market in 2027. 
• Volkswagen may increase production of plug-in hybrid EVs and scale back previous plans to focus on all-electric models in certain markets. The automaker does not currently sell any plug-in hybrid models in the U.S. 
• Ford told its dealerships to pause EV investments pending a review that is expected to be finalized in the coming weeks.
• Honda plans to invest approximately $65 billion on vehicle electrification and software through fiscal 2031. The automaker expects battery and fuel cell EVs to represent 40% of its global sales by the end of the decade.
• Nissan will pause plans to produce next-generation EVs at its Canton, Mississippi plant in order to adjust the development schedule. 
• An EV battery company won its bid to require a Michigan township to comply with agreements supporting the construction of an industrial park.
• Recent investments in battery material production have contributed to lower prices and a short-term inventory surplus for certain critical minerals, according to a report from the International Energy Agency. The analysis notes that lower prices in the near-term “could make it difficult for producers globally to compete” and increase the “level of supply concentration.”
• The Wall Street Journal has an overview of how electronics company Xiaomi brought its electric SU7 sedan to market in China. Xiaomi hopes to deliver 120,000 EVs this year.
• China-based battery maker Green New Energy Material will invest $140 million to build its first U.S. plant in North Carolina.
• ZM Trucks, a California-based subsidiary of Japan’s ZO Motors, announced plans to launch battery electric and hydrogen fuel cell electric commercial trucks in North America by the end of this year.

Automated, Autonomous or Connected Vehicles Technologies

• Volvo Trucks revealed its first production-ready Class 8 tractor equipped with autonomous driving technology from Aurora.
• Isuzu will invest $30 million in California-based Gatik, and the companies plan to produce Class 3-7 autonomous trucks beginning in 2027.

Market Trends and Regulatory

• Two U.S. Senators asked the Federal Trade Commission to investigate eight major automakers that may have misled customers about certain privacy standards by providing vehicle location data to police without a warrant or court order.
• The average vehicle age in the U.S. reached a record 12.6 years, as certain consumers postpone new-vehicle purchases amid high prices and interest rates.
• The U.S. Senate recently confirmed Jennifer Homendy to continue to lead the National Transportation Safety Board.
• Over two dozen trade associations urged the Treasury Department to finalize and publish guidance for the Section 45Z Clean Fuels Production Credit. The tax incentive, adopted in the 2022 Inflation Reduction Act, will offer a credit based on the life-cycle greenhouse gas emission score of each fuel.