Foley Automotive Report

Analysis by Julie Dautermann, Competitive Intelligence Analyst

This report helps automotive suppliers inform their legal and operational decisions to help address challenges and opportunities. Contact your Foley relationship partner, or John R. Trentacosta or Ann Marie Uetz, to follow up.

Key Developments

• Foley & Lardner’s 9th annual Automotive White Paper examines in detail the business and legal trends that will impact the automotive industry in 2022.Key findings will also be discussed March 23, when Foley & Lardner’s automotive thought leaders and the Society of Automotive Analysts (SAA) host the 2022 Automotive Industry Legal Outlook.
• S&P Global Mobility (formerly the automotive team at IHS Markit) is likely to lower its 2022 global light vehicle forecast by 2.6 million units due to the impact of the Russia-Ukraine War, as well as expected shortages of components including semiconductors.
• Parts shortages from Ukrainian suppliers could reduce European auto production by 700,000 units in the first half of the year, according to analysts quoted in Bloomberg.
• Ford, Stellantis and Volkswagen are among the automakers experiencing production shutdowns and disruptions in Europe due to shortages of parts from Ukraine, as well as other components including microchips.
• Toyota will stop production at the majority of its plants in Japan for several days this week due to parts shortages following an earthquake. The automaker previously announced a reduction in global production targets in its fiscal first quarter resulting from chip shortages and the COVID-19 pandemic.
• Lockdowns in multiple Chinese provinces and cities in response to COVID-19 outbreaks disrupted production for at least two major automakers last week.
• Last week, three U.S. senators introduced the bipartisan Fair Repair Act to support the right to repair by requiring manufacturers to provide the necessary tools and documentation available to owners and independent repair providers.
• NHTSA issued a rule allowing autonomous vehicles to be sold without traditional manual controls when the vehicle is “designed to be solely operated by an ADS.”
• Electric vehicles and low emissions technology:
  • Foley & Lardner summarized some of the market conditions that are expected to increase adoption of electric school buses.
  • A new report from the Alliance for Automotive Innovation estimates battery, plug-in hybrid, and fuel cell electric vehicles represented 4.4% of U.S. light vehicle sales in 2021.
  • Ford announced plans in support of a goal to achieve zero emissions for all of its new vehicle sales in Europe by 2035, including the launch of seven new electric cars and vans in Europe by 2024 and a new battery plant in Turkey that begins operations in 2025.
  • Volkswagen will invest $7.1 billion in North America over the next five years, with plans including domestic battery cell production and the launch of 25 new EV models through 2030.
  • Elevated and volatile nickel prices could add hundreds of dollars in costs to EV manufacturers, and hasten a shift toward other metals in certain vehicle components including batteries, according to Bloomberg.
  • According to industry executives quoted in The Wall Street Journal, rising gas prices are expected to increase interest in fuel-efficient or electrified vehicles. However, it’s difficult to quantify the impact on consumer demand due to limited new-vehicle inventory.
  • The U.S. Department of Energy announced five pilot programs as part of a “national workforce development strategy” for domestic lithium-ion battery manufacturing.

Market Trends and Regulatory

• A recent podcast from the Center for Automotive Research discussed the potential impacts of the Ukraine-Russia crisis on the automotive industry.
• Average lead times for semiconductor deliveries reached 26.2 weeks in February, representing an increase of three days over the previous month. Lead times were higher for some devices such as microcontrollers, which average 35.7 weeks.
• The EPA restored a waiver under the Clean Air Act allowing California to pursue its own tailpipe greenhouse gas emission standards and ZEV mandates.
• In a recent letter to the California Air Resources Board, a number of industry groups asked for alternatives to certain regulatory compliance due to concerns including supply chain constraints.
• Analysis from the Insurance Institute for Highway Safety found that SUVs, pickups, vans and minivans were significantly more likely to hit pedestrians when making turns.

OEMs/Suppliers

• Due to the chip shortage, Ford and Stellantis extended production shutdowns for the week of March 14 at two plants in Ohio and Illinois, respectively.
• An unspecified number of Ford Explorer SUVs will be sold without rear temperature controls, and dealers will install the components when semiconductor supplies improve.
• Toyota will invest $27 million to expand production capabilities at its manufacturing site in Long Beach, California.

Connected/Autonomous Vehicles and Mobility Services

• A new study by researchers at The University of Michigan and Carnegie Mellon University predicts that up to 500,000 jobs in U.S. long-haul trucking could potentially become automated at some point in the future. The study notes key challenges to increase market adoption of autonomous trucking include regulation, infrastructure and the ability for the technology to perform in inclement weather.
• GM will acquire SoftBank’s stake in Cruise for $2.1 billion, and make an additional $1.35 billion investment in its autonomous business unit.
• According to Reuters, Pony.ai will issue a recall for some versions of its autonomous driving system software, representing the first recall of an automated driving system.
• Hyundai’s air mobility division Supernal signed a memorandum of understanding with Miami, Florida to launch an electric air taxi service that could begin operations within six years. Joby Aviation and Archer Aviation are among the electric vertical takeoff and landing (eVTOL) companies that have committed to establishing operations in Miami.
• Autonomous technology startup Kodiak Robotics and Ceva Logistics announced an agreement to deliver freight on autonomous trucks on routes in Texas and Oklahoma.

Electric Vehicles and Low Emissions Technology

• The state of Washington passed legislation requiring all new light vehicles sold to be electric by model year 2030.Lawmakers approved similar legislation last year; however, it contained additional provisions and was vetoed by the governor.
• The U.S. Senate introduced the Hydrogen for Trucks Act to support the adoption of heavy-duty hydrogen fuel cell vehicles and hydrogen fueling stations, including financial support to fleet owners and operators that switch to zero-emission vehicles.
• GM’s Cadillac brand begins production of its first electric model, the Lyriq crossover, in Tennessee this week.
• Mercedes-Benz opened a new battery assembly plant in Alabama prior to beginning production on two new all-electric SUVs. Last year the automaker announced plans to build eight battery factories with partners around the world.
• PG&E formed separate agreements with Ford and GM to evaluate the charging capabilities of electric vehicles to power homes in California.
• Specialty vehicle manufacturer The Shyft Group introduced an electric delivery van that will begin production at a plant in the southeastern U.S. in 2023.
• Maserati will offer a battery-electric version for each of its models by 2025, and the brand will be fully electric by 2030.
• Honda plans to invest $1.1 billion over six years to retool its Ontario facilities for hybrid vehicle production. Last year the automaker announced the goal for 100% of its new vehicle sales in North America to be battery-electric and fuel-cell electric by 2040.
• According to LMC Automotive, new-energy vehicle (NEV) sales in China face potential impact from market conditions including rising raw material prices, reduced subsidies and higher retail prices. NEVs reached a market penetration of 14.5% in China in 2021.
• Volvo announced a collaboration with Starbucks to provide a public EV charging network at up to 15 stores located on a 1,350-mile route between Seattle and Denver beginning this summer.