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

• Foley & Lardner and MEMA Original Equipment Suppliers will host a Mobility Supplier Forum on May 22 and 23 in Silicon Valley. The Mobility Supplier Forum is open to automotive industry suppliers and affiliates. Event information and registration can be found here.
• Foley & Lardner partner Ann Marie Uetz will be featured in Supplier Risk from EV Delayed Programs, a Society of Automotive Analysts’ Coffee Break event, on May 22 at 11 a.m. ET.  Registration for the program can be found here.
• U.S. new light-vehicle sales for the first four months of 2024 reached a SAAR of 15.5 million units, representing an increase of 2.2% from the same period last year, according to analysis from the National Automobile Dealers Association.  New light-vehicle sales in April were roughly flat compared to April 2023. 
• The average new-vehicle transaction price was $48,510 in April, representing a decrease of 0.5% from April 2023, according to estimates from Kelley Blue Book featured in Cox Automotive.  The average incentive package last month was 6.3% of the average transaction price.  New-vehicle inventory in April was approximately 46% higher than April 2023 across all automakers, and flat compared to March 2024.
• The U.S. Treasury Department finalized critical minerals and battery components sourcing requirements for EVs to qualify for a tax credit of up to $7,500 under provisions in the Inflation Reduction Act. The rule extends eligibility requirements to 2027 for certain difficult-to-trace battery materials such as graphite. In addition, the final regulations adopt the Traced Qualifying Value Test that will require automakers to more precisely determine where certain EV battery minerals are extracted, processed or recycled. 
• The Biden administration on May 14 announced significantly higher tariffs on a range of Chinese imports.  The tariff rate on imported Chinese EVs will increase from 25% to 100%, and the rate for certain steel and aluminum products will increase from 0-7.5% to 25% in 2024.  In addition, the tariff rate on semiconductors will increase from 25% to 50% in 2025.
• Mexico established temporary import tariffs of 5% to 50% for 544 HS codes for items that include steel, aluminum, and transportation material.  The duties will affect goods from countries with which Mexico does not have free trade agreements.
• The U.S. Commerce Department’s 60-day window for public comments regarding the national security concerns of connected vehicles closed on April 30.  Commerce Secretary Gina Raimondo indicated the Biden administration could ban or restrict Chinese connected vehicles following a review of the comments. 
• China’s light-vehicle exports reached a record-high 417,000 units in April, representing an increase of 38% year-over-year.  New vehicle sales within China fell 5.8% YOY. 

OEMs/Suppliers 

• A number of major auto suppliers reported higher revenue but uneven profits in the first quarter amid elevated labor costs and uncertainty over EV programs.
• Toyota more than doubled its net profit, and sales increased 21% in the fiscal year that ended in March 2024. The automaker expects profits to decline in the fiscal year through March 2025 due to increased investments in human capital and growth technologies. 
• Honda reported a 70% increase in net profit and a 21% rise in sales for the fiscal year that ended in March. Strong demand in Japan, the U.S. and Europe, and a favorable exchange rate, contributed to the results.  
• A new white paper co-authored by the Center for Automotive Research (CAR), UAW’s Next Frontier: Mercedes-Benz in Alabama, provides insight into what may occur after this month’s vote, and the potential impacts on labor relations in the South.
• UAW members at Daimler Truck ratified a four-year labor contract that included wage increases of more than 25%.
• Stellantis plans to base a significant portion of its engineering workforce in low-cost countries in order to reduce expenditures, according to unnamed sources in Bloomberg. 

Electric Vehicles and Low Emissions Technology

• The Biden administration announced $100 million in funding to help small- and medium-sized suppliers retool factories to produce EV components, and make improvements in cybersecurity and energy infrastructure. 
• Analysis by McKinsey & Co. found the majority of battery supply chain investment in North America and Europe has focused on battery cell production, and limited investment has been allocated to the production of key components such as cathodes and anodes, separators, electrolytes and cell packaging.  The analysis indicates regional supply chains are necessary to reduce EV production costs. 
• High purchase and operating costs for battery-electric heavy-duty trucks are expected to continue impeding broader adoption in the near-term, according to views in The Wall Street Journal.
• Amazon and Volvo plan to deploy 50 electric heavy-duty trucks for use in Southern California, including at the ports of Long Beach and Los Angeles.
• Rivian will invest $1.5 billion in its Normal, Illinois plant to produce the R2 electric crossover.  The expansion received an incentive package valued at $827 million, and it will include adding 550 jobs over the next five years.
• Stocks for certain EV startups are trading at up to 90% below their record highs, due to factors that include reduced consumer demand and the impact of ongoing EV price wars.
• EV startup Fisker secured $3.5 million in additional short-term financing from an existing investor.
• Toyota established a North American headquarters for its hydrogen vehicle business near the Los Angeles and Long Beach port complex.
• Ford intends to reduce orders from battery suppliers following profit losses that surpassed $100,000 per EV in the first quarter of 2024, according to unnamed sources in Bloomberg.
• During Ford’s annual shareholder meeting, CEO Jim Farleystated that over 20% of F-150 pickups currently being produced are hybrids.
• Chinese automaker BYD introduced a mid-size hybrid pickup truck in Mexico.  At this time BYD does not have plans to sell the vehicle in the U.S.
• The Advanced Clean Transportation Expo will be held May 20-23, 2024 at the Las Vegas Convention Center.  This is one of the largest commercial vehicle technology events, and it will showcase the latest advanced vehicles, clean fuels, and sustainable transportation technologies and services.
• Accelera by Cummins announced plans to launch a battery electric powertrain for Isuzu’s F-series medium-duty truck in North America. Accelera is the zero-emissions business segment of Cummins.
• Tesla CEO Elon Musk on May 10 said the company will spend “well over” $500 million to expand its Supercharger network this year.
• BMW’s EVs that enter production in 2025 will be able to store electricity and send it back to the grid. GM, Ford, and Volkswagen are among the automakers developing bidirectional charging technology.
• There were over 300 public DC fast-charging stations and over 1,100 Level 2 charging stations across Michigan as of April 2024, according to analysis from Anderson Economic Group.

Automated, Autonomous or Connected Vehicles Technologies

• The National Highway Traffic Safety Administration will investigate two autonomous driving companies following new reports of incidents that include erratic driving and vehicle crashes.
• Global automakers are increasing their partnerships in China to advance development of automated driving and software systems.
• Daimler Truck announced plans to test an autonomous, battery-electric Freightliner eCascadia demonstration truck on certain routes in Texas.
• California lawmakers reintroduced a pair of bills to regulate autonomous heavy trucks and override a potential veto by Gov. Gavin Newsom. The House bill (AB 2286) would require, until 2030, a trained human operator behind the wheel of self-driving trucks that weigh more than 10,000 pounds. The Senate legislation (SB 915) would require local jurisdictions to approve certain regulations for testing and operating autonomous heavy trucks.

Market Trends and Regulatory

• Potentially carcinogenic chemicals that are used to fulfill federal flammability standards were present in the majority of vehicle models tested, according to a study published in Environmental Science & Technology.  The study indicates further analysis of the vehicle microenvironment is needed to assess the risks of human exposure.