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

• Nearly 9,000 UAW members at Ford’s largest truck plant in Kentucky could go on strike at 12:01 a.m. February 23 if the two parties are unable to achieve a local contract agreement. The automaker and UAW Local 862 are over five months past a deadline for a local contract to cover plant-specific issues. 
• China’s exports of passenger vehicles rose 51% in January compared to the same period one year ago.  China became the top global exporter in 2023, up from sixth place in 2020, amid accelerated volumes by companies that include SAIC, Dongfeng, BYD, and Nio.
• The value of Chinese auto parts made in Mexico and exported to the U.S. increased 15% year over year and reached $1.1 billion in 2023, according to preliminary data from Mexico’s auto parts industry association, INA, featured in Bloomberg.
• A UAW official indicated that tariffs on imported light-duty vehicles and auto parts under the United States-Mexico-Canada Agreement (USMCA) will not prevent Chinese companies from evading certain duties and gaining access to the U.S. auto market through Mexico.
• GM, Panasonic and SK On recently announced separate supply agreements to secure graphite for EV battery production.  Efforts to obtain graphite have increased due to China’s recent implementation of export restrictions for the mineral. 
• LG Chem will provide GM with over 500,000 tons of cathode materials for use in EV batteries as part of a $19 billion long-term supply agreement that begins in 2026. 
• Toyota will invest an additional $1.3 billion in its Georgetown, Kentucky plant to produce battery pack assemblies, as well as to support “future electrification efforts” that include a new three-row battery-electric SUV. 
• Ford expects to lose up to $5.5 billion on battery-electric vehicles (BEVs) in 2024, compared to approximately $4.7 billion in 2023. The automaker plans to delay or cut $12 billion in EV spending, due in part to expectations that broader adoption will not accelerate until costs are more comparable to gasoline-powered vehicles.  CEO Jim Farley also indicated Ford is pursuing a broad initiative to reassess certain electrification strategies that include the development of a smaller, low-cost EV platform, increased hybrid sales, and a potential shift away from in-house battery production.
• Eighteen percent of EV charging attempts at U.S. public chargers failed in the last quarter, according to analysis from J.D. Power’s U.S. Electric Vehicle Experience (EVX) Public Charging Study excerpted in Kelley Blue Book.  The study found Level 2 charging stations contributed to the largest drop in satisfaction, and challenges included station outages, malfunctions, and lengthy wait times.

OEMs/Suppliers

• Over 50% of employees at Volkswagen’s Chattanooga, Tennessee plant have signed up to join the UAW, and the union intends to seek recognition if it reaches a threshold of 70%.  As part of a broad campaign to organize non-union auto plants, the UAW previously  announced it had signed up more than 30% of employees at a Mercedes-Benz plant and a Hyundai plant in Alabama.
• Some of the automakers and suppliers that hoped to increase the use of robots to automate certain manufacturing processesdo not have enough workers to integrate them due to persistent labor shortages, according to a report in Crain’s Detroit. 
• Ford expects to achieve annual savings of $10 million by eliminating a driver-assist parallel parking feature that was used by very few of the vehicles’ owners.
• Stellantis reported its 2023 full-year net revenue reached EUR189.54 billion, up 6% from 2022. 
• Volkswagen entered discussions with its joint venture partner in the Xinjiang region of China, amid reports U.S. customs officials impounded certain vehicles due to potential violation of the Uyghur Forced Labor Prevention Act.

Electric Vehicles and Low Emissions Technology

• The U.S. federal government reimbursed auto dealers for $135 million in advance point-of-sale EV tax credit payments between the start of this year through February 6. The claims represented approximately 15% to 20% of EV sales in a typical month, according to analysis in POLITICO Pro.
• China’s Ministry of Commerce encouraged the nation’s new-energy vehicle manufacturers to expand their overseas presence as a way to mitigate foreign trade restrictions.
• Chinese EV manufacturer BYD is exploring the feasibility of establishing a plant in Mexico, according to a report by Nikkei Asia.
• Ford expects low-cost Chinese EVs to become a “colossal strategic threat” to automakers in the U.S. market.
• In response to a slowdown in purchases by BEV early-adopters in certain regions, a number of global automakers could reconsider their initial emphasis on producing high-priced luxury BEVs and develop more affordable electric options that include hybrids.
• Tesla earned $1.7 billion in 2023 by selling regulatory credits to automakers with new-vehicle fleets that exceed emissions standards. 
• Automotive News provided an overview of the U.S. EV brands ranked by 2023 new-vehicle registrations.
• Seven leading automakers’ EV charging joint venture, IONNA, received regulatory approval to begin operations.  The joint venture partners – BMW, General Motors, Honda, Hyundai, Kia, Mercedes-Benz and Stellantis – plan to install at least 30,000 EV chargers in North America.
• Shell will close its hydrogen fueling station network for light-duty vehicles in California, due to issues that include “supply complications,” as well as a goal to prioritize capital investment in areas that have “distinct competitive advantages.”
• Volkswagen-backed Scout Motors began construction on a $2 billion plant in South Carolina to produce models that include electric SUVs.
• A joint venture between Honda and Sony plans to launch three EV models by 2030.
• Consumer Reports’ annual brand satisfaction survey awarded the top ranking to Rivian. 
• Certain producers of lithium and nickel have postponed projects due to falling commodity prices and slower-than-anticipated demand for EVs.

Automated, Autonomous or Connected Vehicles Technologies

• A recent study by McKinsey & Co. found that 38% of U.S. customers across all auto segments and 51% of EV customers would be willing to switch brands for improved vehicle connectivity.  McKinsey predicts connected vehicles will represent 90% of autos sold by 2030, up from approximately 50% today.
• A study by AAA found reverse automatic emergency braking (AEB) systems prevented a collision with a vehicle passing behind a backing-up car in just 2.5% of the test runs. The study advised drivers not to rely solely on AEB, but to use the system to “enhance their awareness.”
• GM will expand coverage for its Super Cruise advanced driver assistance system into smaller towns and rural areas, and the system will cover 750,000 miles, up from 400,000 miles. 

Market Trends and Regulatory

• J.D. Power’s 2024 U.S. Vehicle Dependability Study found that consumers experienced increased levels of problems for nearly two-thirds of the assessed brands. The average number of problems per 100 vehicles surveyed rose to 190 in the latest study, from 186 in 2023, and key areas of dissatisfaction were infotainment and driver assistance system alerts.  In addition, vehicle owners experienced more issues with BEVs and plug-in hybrid electric vehicles (PHEVs) compared to owners of gas-powered and hybrid vehicles. 
• Uber was profitable as a public company for the first time in 2023, and Lyft has projected it will be cash-flow positive for the first time in 2024. The companies have recently focused on profitable growth and cost discipline.