Foley Automotive Update

Analysis by Julie Dautermann, Competitive Intelligence Analyst

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Key Developments

• Foley & Lardner LLP partner Vanessa Miller commented on a series of recent Michigan court decisions impacting the automotive supply chain in the Law360 article, “Biggest Transportation Decisions: Midyear 2024 Review.”
• Foley & Lardner assessed short- and medium-term industry scenarios involving Chinese automotive brands that seek to benefit from certain provisions in the United States-Mexico-Canada Agreement (USMCA).
• The Biden administration on July 10 announced companies that import steel and aluminum goods from Mexico must prove the metals were “melted and poured” in North America or be subject to a 25% levy under Section 232 of the Trade Expansion Act of 1962.
• Automotive News evaluated potential implications to auto industry regulation that may result from the U.S. Supreme Court decision to overturn the Chevron deference. 
• At the Republican National Convention in Milwaukee, former President Donald Trump vowed to end what he referred to as the “electric vehicle mandate” if he returns to the White House. While the U.S. does not have a federal mandate that requires EV sales, certain critics of vehicle emissions standards issued by the Environmental Protection Agency in March 2024 have suggested the regulation could force automakers to sell EVs. Separately, Trump signaled an openness for Chinese companies to manufacture vehicles in the U.S. to boost the economy.
• The top seven automakers in the U.S. are on track to exceed EPA vehicle emissions standards by between 8% and 154% by 2032, according to analysis from Greenpeace.
• The U.S. Commerce Department could issue proposed rules this summer that imposes limits on certain types of connected vehicle software originating from adversarial countries that include China, according to a report in Reuters.
• Vehicle repossessions in the U.S. were 23% higher in the first half of 2024 compared to the same period one year ago, and 14% higher than 2019 pre-pandemic levels. 
• The average new-vehicle transaction price was $48,644 in June, representing a decrease of 0.6% from June 2023, according to estimates from Kelley Blue Book featured in Cox Automotive. The average new-vehicle incentive package was 6.4% of average transaction price last month, compared to 4.2% of ATP in June 2023.
• Anderson Economic Group estimated U.S. dealerships lost more than $1 billion in revenue and over 56,000 new-vehicle sales due to cyberattacks that began June 19 at a software provider widely used in the auto retail sales sector.
• The Federal Reserve Bank of Chicago predicts that through 2029, “only modest and selective changes are likely to occur in the distribution of light vehicle production within North America.” The analysis indicates the industry operated 74 light-vehicle assembly plants in North America in 2023, and by the end of the decade seven plants are expected to open and one joint venture plant operated by Nissan and Mercedes-Benz in Mexico is scheduled to close.
• Automotive News provided an update on some of the strategic plans the top 10 largest suppliers are using to adapt to market risks.

OEMs/Suppliers 

• Earlier this month, Stellantis filed a new lawsuit against another supplier over allegations the company threatened to withhold parts to receive a price increase, according to a report by Crain’s Detroit. 
• GM temporarily halted production at its midsize truck plant in Wentzville, Missouri due to the impact of a UAW strike at the plant’s seat supplier.
• For the first time in 2023, foreign-owned automotive manufacturers produced more vehicles in the U.S. than the Detroit Three automakers combined. Ford, GM and Stellantis collectively built 4.6 million vehicles in 2023, while non-U.S. automakers that include Toyota produced more than 4.9 million vehicles.  
• Ford will invest $3 billion to expand production of F-Series Super Duty pickups at its Oakville, Ontario, plant beginning in 2026.
• GM shareholders voted against two proposals intended to assess sustainable sourcing practices and evaluate the automaker’s supply chain exposure to child labor outside the U.S. The proposals were rejected because GM’s existing policies were said to already support “robust and transparent reporting practices” and a “zero-tolerance” approach to child labor. 
• Metal auto components supplier Gestamp plans to invest up to $390 million across three existing sites and one new facility in Michigan.
• GM reported Q2 2024 net income of $2.9 billion on a record-high quarterly revenue of $47.9 billion, representing year-over-year increases of 14% and 7%, respectively.

Electric Vehicles and Low Emissions Technology

• Analysis in Bloomberg Law indicates the U.S. Occupational Safety and Health Administration and its state partners have issued more citations for alleged violations at EV battery plants in the first half of 2024 than during all of 2023. 
• The U.S. Department of Energy announced $1.7 billion in funding from the Inflation Reduction Act to convert 11 manufacturing facilities across eight states to produce electric and zero emissions vehicles and related components. Recipients of the Domestic Manufacturing Auto Conversion Grants program include Cummins, Fiat-Chrysler, GM, Harley-Davidson and Volvo.
• The DOE announced a conditional loan of up to $1.2 billion to Entek Lithium Separators LLC to support a new manufacturing facility in Indiana that will produce lithium-ion battery separators primarily for EVs. 
• GM CEO Mary Barra said the automaker is no longer pursuing a production target of 1 million all-electric vehicles by the end of 2025, and noted the pace of achieving specific EV production volumes will be based on consumer demand. 
• The State of Michigan lowered an incentives package to Ford after the automaker reduced the scope of projects that include the BlueOval Battery Park in Marshall. Ford has delayed or canceled $12 billion in planned EV investments due to slower-than-anticipated EV sales.
• GM will delay the launch of electric truck production at its Orion Assembly plant in Michigan to mid-2026. The automaker also indefinitely postponed plans to produce an electric Buick model.
• Nikkei Asia reports China’s EV exports fell 13.2% from May to June, representing the third consecutive monthly decline.
• Reuters reports China-based electric truck startup Windrose Technology plans to establish a manufacturing plant in Georgia.
• Costly repairs and the effects of battery degradation could lead consumers to replace EVs more frequently than gasoline-powered vehicles, according to views from dealerships featured in The Wall Street Journal.
• North American operators will invest a collective $6.1 billion on EV charging infrastructure in 2024, nearly double the amount invested in 2023, according to analysis from BloombergNEF. The analysis indicates that at the current pace of investment, public fast-charging sites could outnumber U.S. gas stations in less than ten years.
• Shopping mall operator Simon Property Group will partner with bp pulse to support the installation and operation of over 900 ultra-fast charging points at 75 locations across the U.S.
• Starbucks and Mercedes-Benz announced a partnership to install high-power EV chargers at 100 Starbucks locations across the U.S.
• Stellantis recalled approximately 24,000 Chrysler Pacifica plug-in hybrid minivans from model years 2017 through 2021 due to the risk of battery fires.
• Former GM executive James Taylor was named CEO of electric commercial vehicle company Bollinger Motors. 

Automated, Autonomous or Connected Vehicles Technologies

• S&P Global Mobility estimates the total revenue from connected vehicle services and paid updates is approaching $6 billion. The industry hopes to reach $200 billion in revenue from vehicle software, services and data by the end of the decade.
• Analysis by the Insurance Institute for Highway Safety and the Highway Loss Data Institute found little evidence partial automation systems provide additional safety benefits beyond those of crash avoidance features such as front automatic emergency braking (AEB). According to IIHS President David Harkey, “Everything we’re seeing tells us that partial automation is a convenience feature like power windows or heated seats rather than a safety technology.”

Market Trends and Regulatory

• Eight separate legal challenges to the U.S. Department of Transportation’s final rule for model year 2027 to 2032 corporate fuel economy standards were consolidated in the Sixth Circuit, according to an update from Law360. 
• Industry groups and a coalition of over a dozen states led by Ohio petitioned the U.S. Supreme Court to review a D.C. Circuit ruling that upheld the EPA’s approval of a waiver that enables California to establish its own vehicle emissions standards.
• Reuters reports Stellantis paid nearly $200 million in civil penalties so far this year for failing to meet U.S. fuel economy standards, and the automaker is responsible for over $450 million in outstanding penalties.
• Cleveland-Cliffs announced it will acquire Canadian steelmaker Stelco Holdings for approximately $2.5 billion.
• The head of the dockworkers’ union at U.S. East and Gulf Coast ports warned the risk of a strike this fall is growing due to stalled contract negotiations.