Foley Automotive Update

Analysis by Julie Dautermann, Competitive Intelligence Analyst

This update helps automotive suppliers inform their legal and operational decisions to help address challenges and opportunities. Contact your Foley relationship partner, or Ann Marie Uetz, Vanessa L. Miller, or Nicholas J. Ellis, to follow up.

Key Developments

Full-year 2023 U.S. new light-vehicle sales reached approximately 15.5 million units, representing an increase of 12% from 2022 and the highest annual volumes since 2019.
GM sold 2.6 million new vehicles in the U.S. last year, representing an increase of 14% from 2022 and making it the top ranked U.S. automaker based on sales volumes.
At least 10% of consumers that want a new vehicle are unable to purchase onedue to high interest rates and elevated average transaction prices, according to analysis from Cox Automotive.
Kathleen (Kate) Wegrzyn, Foley & Lardner LLP partner and chair of the firm’s Supply Chain team, is quoted in the Law360 article, “Extreme Weather, Regulation Rank As Top Supply Chain Risks,” about how trade policies, geopolitical tensions and the increased prevalence of severe weather events pose significant risks to supply chains in 2024.
EV supply chains could be impacted by China’s decision to halt exports of certain technologies required to produce rare-earth metals and magnets.
Federal data indicates the number of battery-electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) eligible for a consumer tax credit of up to $7,500 fell significantly to approximately 13 models following recently announced Treasury Department guidance pertaining to sourcing requirements for certain critical minerals or battery components.
The KPMG Global Automotive Executive Survey released this month indicates a median expectation for BEVs to represent 27% of the U.S. new vehicle market by 2030. In addition, 46% of survey respondents believeBEVs will not reach cost parity with internal combustion engine (ICE) vehicles, without subsidies, before 2030. The survey also found 45% of respondents (outside China) were very or extremely concerned about supply chains for lithium, cobalt and other battery components.
Lower prices for EV battery metals such as lithium carbonate, cobalt and nickel are expected to persist in 2024, according to analysis in The Wall Street Journal.
PwC analysis found 34% of vehicle launches experienced production delays in 2023, up from 5% in 2018, due to factors including supply chain challenges, quality issues, workforce constraints and strategic misfires. The analysis predicts delayed launches will average between 20 and 40 per year through 2026, with additional launch activity for EVs expected to contribute to higher delays.
The U.S. Environmental Protection Agency will hold a hearing on January 10 to review California’s Advanced Clean Cars II Regulations, which would require all new passenger vehicles sold in the state to be zero-emission by 2035. The public comment period for this review ends February 27, 2024.

OEMs/Suppliers

A number of major automakers reported full-year 2023 U.S. sales volume increases compared to 2022, when the industry experienced its lowest sales volumes in over a decade.
- Toyota sold 2.25 million units in 2023, representing a 6.6% increase year-over-year.
- Ford sold 1.99 million units, up 7% YOY.
- Hyundai Motor and its Kia and Genesis brands sold a combined 1.65 million units (up 12% YOY) and surpassed its previous U.S. record of 1.49 million units in 2021.
- American Honda reported sales exceeding 1.3 million units (up 33% YOY).
- Stellantis sold 1.52 million units (-1% YOY). However its PHEV sales increased 124% YOY.
According to data from the National Highway Traffic Safety Administration, Ford reported the most U.S. vehicle recalls among major automakersfor the third consecutive yearin 2023. Searchable data can be found via NHTSA Recalls by Manufacturer.
The U.S. Commerce Department intends to gather information on the Chinese production of legacy semiconductors in industries including automotive, as part of an initiative to assess domestic reliance on certain types of foreign technology.

Electric Vehicles and Low Emissions Technology

Tesla produced 1.84 million EVs in 2023, representing an increase of 35% compared to 2022.
China’s BYD sold 3.02 million new-energy vehicles in 2023, of which approximately 1.6 million were PHEVs and 1.4 million were BEVs. BYD’s overseas sales in the second half of 2023 more than tripled from a year earlier, and the company sold a record-high number of BEVs in the fourth quarter of 2023.
GM sold an estimated 75,000 BEVs in 2023, falling short of a prior goal of 150,000. The majority of GM’s 2023 EV sales were Bolt models that are now discontinued, with the new generation due in 2025.
Ford sold over 72,000 BEVs in 2023, representing approximately 3.8% of total sales volume and an increase of 18% YOY.
Analysis from the American Transportation Research Institute predicts California would need to generate 57% more electricity than today’s output if the state were to achieve full electrification of its vehicle fleet.
A report from the EPA’s Office of the Inspector General found the Clean School Bus Program could be impeded by insufficient charging stations and the inability of local utility companies to meet increasing power demands. The 2021 infrastructure law provides $5 billion over five years, or through 2026, to replace existing school buses with zero-emission school buses.
The Wall Street Journal reports the Biden administration is considering raising tariffs on certain Chinese goods, including EV battery packs.
Amazon will partner with hydrogen company Plug Power as part of an initiative to power fuel-cell lift trucks at its Aurora, Colorado fulfillment center.
U.S. auto dealerships have until January 19 to submit a time-of-sale report to the IRS for EVs sold during the first 16 days of this month that qualify for federal tax credits, according to an extension announced by the IRS on January 5. This extension adds 15 days to the original reporting deadline.

Automated, Autonomous or Connected Vehicles Technologies

GM provided additional context behind its spring 2023 decision to phase out Apple CarPlay and Android Auto in future vehicles, citing driver distraction and safety risks due to stability issues in the systems that can cause dropped connections and slow responses.
Bloomberg reports several autonomous truck companies have a goal to remove human safety drivers later this year from heavy-duty vehicles that have been operating on test routes in certain parts of Texas.

Market Trends and Regulatory

A Law360 report on significant transportation litigation in 2024 includes a number of D.C. Circuit cases pertaining to fuel economy and vehicle emissions regulations from the state of California, the EPA and NHTSA.
Bain & Company analysis indicates automakers decreased their upstream Scope 3 emissions by only 2% since 2017, while Tier 1 suppliers increased Scope 3 emissions by an estimated 5% during the same time frame. The analysis notes supply chain decarbonization is “particularly challenging” in the auto industry due to the significant number of suppliers across multiple tiers.

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