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

• Recent pricing disputes with suppliers have resulted in production shutdowns for Stellantis, according to a report in Crain’s Detroit.
• President Joe Biden on April 5 announced $8 million in federal funding to double automotive shipping capacity at the Port of Baltimore’s sole unaffected terminal following the Francis Scott Key Bridge collapse.
• Auto industry lay-offs in Michigan have trended upward amid the effects of expensive UAW contracts and uncertainty over the pace of the EV transition, according to a report in Crain’s Detroit.
• High interest rates threaten a key source of automaker profitability as sales for certain large pickup truck models declined by double-digit percentages in the first quarter of 2024.
• First-quarter 2024 U.S. new EV sales rose 3.3% year-over-year to nearly 270,000 units, and represented a 7.1% share of total U.S. new-vehicle sales. This compares to 47% growth and a 7.6% market share in the first quarter of 2023. Many of the early adopters in the U.S. have already purchased new EVs, and automakers now face skeptical mainstream buyers with concerns that include charging infrastructure, battery life and high purchase and financing costs.
• U.S. hybrid vehicle sales increased by 65% in 2023, and BEV sales rose by 46%, according to analysis from Edmunds.
• Light-duty trucks (utility vehicles, minivans and pickups) represented 78% of the battery electric and plug-in hybrid electric vehicle market in the fourth quarter of 2023, according to an Alliance for Automotive Innovation report released on April 3.  The report indicates the average transaction price for electric light-duty vehicles was $51,600 in Q4 2023, compared to $48,300 for gasoline-powered models in the same period.
• BloombergNEF estimates lithium-ion battery demand across EVs and stationary storage reached approximately 950 gigawatt hours in 2023, while global battery manufacturing capacity approached 2,600 GWh.
• Over a dozen states sued the Energy Department and the Environmental Protection Agency to challenge a rule that revises the method of calculating EV petroleum-equivalent fuel economy. The revision could have a significant impact, as the updated calculation could result in a drop of up to 65% for EV mpg ratings in future model years. 
• An appeals court on April 9 upheld the U.S. Environmental Protection Agency’s Clean Air Act waiver that allows California to establish its own greenhouse gas emissions standards for vehicles and maintain a zero-emission vehicles program, rejecting challenges filed by industry groups and state attorneys general.
• Texas, Florida and Arizona have the best regulatory environment to support testing and operating autonomous vehicles, according to the Autonomous Vehicle Industry Association’s inaugural State of AV report.

OEMs/Suppliers  

• U.S. Steel announced its shareholders approved the $14.1 billion sale of the company to Japan-based Nippon Steel.  The closure of the deal faces uncertainty due to factors that include political opposition and the outcome of a Department of Justice antitrust investigation.  If the deal fails to close, the Alliance for Automotive Innovation urged the Biden administration to prohibit a domestic competitor’s takeover of U.S. Steel due to concerns over the potential for anti-competitive pricing of materials.
• GM plans to move its global headquarters in 2025 to the new Hudson’s Detroit development, following 28 years in the city’s Renaissance Center.
• Tesla CEO Elon Musk intends to increase pay for artificial intelligence engineers amid intense competition for talent. 
• A survey by NXP Semiconductors and Wards Intelligence found automakers will have varied strategies toward software-defined vehicles, and a “definitive prevailing architecture might not emerge until the decade’s end.”
• Volkswagen will invest $2.69 billion to expand production and research in China to support goals that include reducing the time required to bring new technologies to market. 
• Suppliers have urged automakers to standardize sustainability reporting metrics, according to analysis from MEMA excerpted in Automotive News.
• Volvo Group plans to build a heavy-duty truck manufacturing plant at an unspecified location in Mexico.

Electric Vehicles and Low Emissions Technology

• Tesla will lay off over 10% of its global workforce.  The company had more than 140,000 employees as of December 2023.
• The U.S. government reimbursed auto dealers for over $580 million in advance point-of-sale consumer EV tax credit payments since the start of 2024.
• Ford will postpone its next-generation electric pickup truck to 2026 instead of late 2025, and plans for a three-row electric SUV have been pushed back to 2027. The delays were attributed, in part, to allowing further time for the consumer market to develop. Separately, Ford indicated it will reduce prices of certain electric F-150 Lightning pickup models by up to $5,500 as sales resume following a temporary halt over an unspecified quality issue. 
• Stellantis CEO Carlos Tavares indicated automakers typically need a 1,000 lb. battery pack to provide “decent range,” and he estimates a 50% weight reduction is required to make EVs more efficient and environmentally sustainable.
• Bloomberg New Energy Finance (NEF) predicts annual worldwide public-charging revenue will reach $127 billion by 2030. Tesla is expected to represent $7.4 billion, or 6% of this amount.
• In slightly over two years, Amazon installed over 17,000 EV chargers at approximately 120 warehouses around the U.S.

• New data from the European Commission found plug-in hybrid emissions were over three times higher than official estimates, as the vehicles were driven in electric mode less than expected. Revised estimates pertaining to PHEV driver behavior are expected from the EU in 2025, and from the U.S. by 2027.
• Ford plans to offer hybrid versions of all its models in North America by 2030. Ford sold a record-high 38,421 hybrids in the U.S. in the first quarter of 2024, compared to 20,223 BEVs.
• The U.S. Department of Labor will require an EV battery manufacturer to pay over $77,000 in fines after workers suffered potentially permanent respiratory damage following a lithium battery fire at a facility in Georgia.
• The World New Energy Vehicle Congress (WNEVC) will hold a conference at the Citizen Hotel in Sacramento, California from May 16-17, according to an April 7 announcement from the Chinese Society of Automotive Engineers.  
• Just over 3,000 hydrogen fuel cell cars were sold last year in California, the only state that sells them. Adoption has been impeded by hydrogen shortages, limited fueling stations and high fueling costs.
• Unsold Chinese-made EVs are accumulating at European ports amid cooling consumer demand and logistical challenges with inland shipping.

Automated, Autonomous or Connected Vehicles Technologies

• A technical brief from the Association for Computing Machinery (ACM) questioned the feasibility of achieving widespread use of fully automated vehicles on public roads. The analysis indicated it is unclear when AVs may be capable of operating safely without a human driver’s attention outside of limited roadways and controlled conditions. ACM describes itself as the world’s largest scientific computing society.
• GM’s autonomous driving unit, Cruise, will resume operations in Phoenix that will focus on “manual driving to create maps and gather road information.” Cruise suspended operations across the U.S. last October following the loss of its operating permit in California.
• Tesla could reveal a robotaxi later this year, according to a social media post by Elon Musk. 
• Walmart will expand its deployment of autonomous forklifts by adding 19 of the machines at four of its distribution centers.

Market Trends and Regulatory

• Law360 reports the Alliance for Automotive Innovation is collaborating with lawmakers on legislation that would allow domestic abuse survivors to end their abuser’s access to certain data enabled by internet-connected vehicle technology.
• Chinese manufacturers within automotive and other industries are expected to increase investments in Mexico to avoid tariffs on goods exported to the U.S., according to a video report in The Wall Street Journal. 
• In a recent letter, U.S. Senator Sherrod Brown (D-OH) urged President Biden to permanently ban Chinese-made EVs from entering the U.S. auto market due to the threat to “economic and national security, and the entire auto industry.” Brown is expected to face a challenging campaign this election cycle, and the outcome could determine which party controls the U.S. Senate.