Foley Automotive Update June 2024

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

Key Developments

• Foley & Lardner provided an overview of a recent Sixth Circuit decision that found an automotive supplier’s terms and conditions were not sufficient to create a requirements contract.
• Foley & Lardner provided a summary of legal considerations for the installation and operation of electric vehicle chargers.
• U.S. new light-vehicle sales in May reached a SAAR of 15.9 million units, up 2.4% from May 2023, according to analysis from the National Automobile Dealers Association (NADA). The first five months of 2024 reflect a SAAR of 15.55 million units, up 2% from the same period last year.
• New light-vehicle inventory reached an estimated 2.73 million units industrywide at the end of May, representing an increase of 50.3% from May 2023.
• Canada’s government and negotiators for the union representing border agents continued contract discussions this week in an effort to avoid a labor disruption at the border. Frontline border agents are typically considered essential. However, if an agreement cannot be reached in the coming days the union could pursue a potential job action such as “work-to-rule,” and this could delay border processing.
• The National Highway Traffic Safety Administration on June 7 finalized corporate average fuel economy (CAFÉ) standards that will require ”an industry fleet-wide average for passenger cars and light trucks of roughly 50.4 miles per gallon (mpg) in MY 2031.” The final standards will direct a 2% per-year improvement in fuel efficiency for MY 2027-2031 passenger cars, and light trucks require a similar improvement beginning in MY 2029. 
• Texas Attorney General Ken Paxton opened an investigation into several auto manufacturers following reports of the collection and sale of drivers’ data to third parties that included insurance providers.
• GM is named in roughly two dozen class-action lawsuits that allege the automaker gathered data about drivers without their consent and provided the information to insurance companies.
• The Center for Automotive Research estimates the U.S. Federal Trade Commission’s final rule pertaining to dealerships’ vehicle advertising and finance and insurance processes could result in “median upfront compliance costs of $31,450 with the average recurring annual costs for dealers at approximately $39,862 per location.” CAR projects the FTC’s Combating Auto Retail Scams (CARS) Rule would create a “net cost of $24.1 billion over 10 years, reduced from the original CAR Report estimated net cost of $38.1 billion.”
• The NADA announced support for a provision in the Fiscal Year 2025 Financial Services and General Government (FSGG) appropriations bill that would prohibit the FTC from using the budget’s funds to implement or enforce the CARS Rule.
• The UAW reached a tentative local agreement with Ultium Cells, the GM and LG Energy Solution joint venture plant, in Lordstown, Ohio.

OEMs/Suppliers

• The U.S. Department of Labor filed a lawsuit against Hyundai and two other companies over allegations of illegal child employment in Alabama.
• The U.S.-Mexico-Canada Agreement’s Interagency Labor Committee for Monitoring and Enforcement requested a review of potential labor rights violations at a Volkswagen plant in Puebla, Mexico.
• Toyota will invest $282 million into its engine plant in Huntsville, Alabama, in areas that include adding new production lines for certain drivetrain components. Toyota Alabama currently supplies engines to seven vehicle plants in North America.

Electric Vehicles and Low Emissions Technology

• Exports by Chinese EV market leader BYD reached over 176,000 units in the first five months of 2024, representing an increase of 177% compared to the same period last year.
• A number of Republican lawmakers called for the U.S. to ban imports from certain key Chinese lithium-ion battery companies, due to alleged violations of the Uyghur Forced Labor Prevention Act.
• Stellantis CEO Carlos Tavares warned that efforts to reduce EV production costs will place a significant burden on parts suppliers. Tavares also indicated the automaker may in-source certain parts to reduce costs, or increase reliance on sourcing from “best-cost countries.” 
• Accelera by Cummins, Daimler Truck and PACCAR completed the formation of their joint venture, Amplify Cell Technologies. The joint venture was announced in September 2023, and it is expected to support battery cell production for the U.S. supply chain.
• Subaru, Toyota and Mazda plan to develop compact engines that will be compatible with various carbon-neutral fuels.
• GM will reassess the timetable for producing EV motors at its St. Catharines, Ontario, engine and transmission plant.
• Volvo will debut a supply chain traceability platform that will allow customers in the European Union and the U.S. to identify the sources of certain EV battery components. The EV battery passport utilizes blockchain technology and was developed with London-based Circulor.
• Honda began production of a fuel-cell electric CUV at its Marysville, Ohio, plant.
• Stellantis and Mercedes paused constructionon a lithium-ion battery plant in Germany to assess options for technology and costs. The companies indicated they may pivot and pursue low-cost lithium-iron-phosphate cells for planned entry-level EVs.

Automated, Autonomous or Connected Vehicles Technologies

• Automotive News provided an overview of robotaxi companies’ recent plans and developments.
• Hyundai and autonomous driving technology company Plus are testing a self-driving Class 8 hydrogen fuel cell electric truck for the U.S. market.

Market Trends and Regulatory

• Sport utility vehicles accounted for a record 48% of global passenger vehicle sales in 2023, up from 41.4% in 2020 and 20.58% in 2013, according to a report from the International Energy Agency. The analysis indicates SUVs represented more than 25% of the annual global demand growth for oil in 2023, and 20% of the added energy-related CO2 emissions.
• UAW President Shawn Fain is under investigation by an independent federal monitor due to allegations that include obstructing attempts to access information and retaliation against other union leaders, according to a report in The Detroit News.
• The Geneva International Motor Show will be discontinued indefinitely due to falling attendance and competition from other events.
• At a recent parliamentary committee hearing to identify key topics for an anticipated 2026 review of the United States-Mexico-Canada Agreement (USMCA), auto manufacturers and steel producers urged Canadian lawmakers to raise tariffs on certain Chinese imports.

Analysis by Julie Dautermann, Competitive Intelligence Analyst