Foley Automotive Update

Analysis by Julie Dautermann, Competitive Intelligence Analyst

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Key Developments

• Foley & Lardner provided key takeaways concerning Mexico’s creation of mandatory-technical-standards, Normas Oficiales Mexicanas (NOM), for EVs.
• The Wall Street Journal reports a number of U.S. companies could delay investment plans in Mexico to assess the impact of outgoing President Andrés Manuel López Obrador’s recently passed legal and constitutional reforms. Incoming President Claudia Sheinbaum assumes office October 1. The article also notes the reforms may impact a 2026 review of the U.S.-Mexico-Canada trade agreement.
• U.S. fleet sales in the first eight months of 2024 for the combined category of rental, commercial, and government sectors reached 1.5 million units, which is down 2.3% from the same period in 2023.
• The average new-vehicle monthly payment in August fell 1.6% to $737, the lowest level in two years. According to analysis from Cox Automotive, vehicle affordability “is becoming less of a macroeconomic issue and more of an automotive industry issue. Automakers are opting to manufacture higher-priced vehicles, so further declines in interest rates will not significantly reduce payments.”
• Kelley Blue Book estimates the new-vehicle average transaction price was $47,870 in August. The average incentive package was the highest in three years, at 7.2% of ATP, amid new-vehicle inventory levels that were up by 40% year-over-year. 
• The Office of the U.S. Trade Representative on September 13 finalized Section 301 tariff increases for Chinese goods that includes levies of 100% on EVs and 25% on lithium-ion batteries. The Biden administration first announced the tariffs in May 2024.
• Clean Energy Associates predicts the global market for lithium-ion batteries will remain oversupplied through 2028, due to overcapacity in China in the near-term, as well as lower EV production targets in the U.S. and Europe. The CEA also stated, “the United States’ Section 301 tariffs will increase costs for battery suppliers that do more manufacturing in the U.S. but should not lead to a significant contraction in the U.S. market when duties on non-EV batteries and natural graphite take full effect in 2026.”
• U.S. imports of lithium-ion batteries for EVs increased nearly 26% in the second quarter of 2024 compared to the same period one year ago.
• Reuters provided a summary of certain global automakers’ revised EV production targets. Most recently, Toyota reduced its near-term global EV production goal by approximately 30%.
• Some of the largest global suppliers have pursued revised contract terms and increased collaboration to manage risks involved in electrification programs, according to a report in Automotive News.
• California’s Department of Motor Vehicles recently issued draft regulations that would permit and govern the testing and deployment of heavy-duty autonomous vehicles, and update existing rules for the testing and deployment of light-duty AVs on public roads in the state.
• California state lawmakers passed a bill (A.B. 2286) that would require human operators to be physically present in autonomous trucks that operate in the state. Governor Gavin Newsom vetoed an earlier version of the bill (A.B. 316) in 2023. Lawmakers also passed A.B. 3061, which would require autonomous vehicle companies in California to publicly report to the state DMV vehicle collisions, disengagements, immobilizations or certain traffic violations involving their vehicles.

OEMs/Suppliers 

• GM will temporarily stop production the week of September 23 at its Ford Wayne Assembly light-duty truck plant due to an unspecified supply chain issue.
• In response to higher inventory levels, Stellantis recently implemented a number of temporary production shutdowns at three plants in Michigan and Ohio that produce the Jeep Wrangler and Grand Cherokee SUVs.
• Denso will utilize digital infrastructure and automation technologies to establish a new plant in Japan capable of “24-hour unmanned operation.” 
• GM and Unifor Local 88 are negotiating a new agreement to cover 1,300 workers at the automaker’s CAMI assembly plant in Ontario, ahead of a contract that is set to expire September 17, 2024.
• GM and Hyundai signed a memorandum of understanding to assess joint development and production of “passenger and commercial vehicles, internal combustion engines and clean-energy, electric and hydrogen technologies.”

Electric Vehicles and Low Emissions Technology

• The U.S. House passed a bill (H.R. 7980) to exclude vehicles that contain certain materials sourced from China and other “prohibited foreign entities” from the Inflation Reduction Act’s EV tax credits.
• A majority of the 1,000 workers at a GM and LG Energy Solution joint-venture battery plant in Spring Hill, Tennessee signed cards in favor of joining the UAW. 
• Stellantis will invest $406 million to produce electric and hybrid vehicles at its Sterling Heights Assembly Plant, Warren Truck Assembly Plant, and Dundee Engine Plant in Michigan. The Sterling Heights Assembly Plant will receive the largest investment, $235.5 million, to build the automaker’s first electric version of the Ram pickup.
• Sales of battery electric vehicles and hybrid electric vehicles in China rose 43% YOY in August, while total passenger car sales fell 1%, according to estimates from the China Association of Automobile Manufacturers (CAAM).
• Chinese EV maker BYD raised its sales target to 4 million vehicles globally in 2024, up from 3.02 million vehicles in 2023. For comparison, Ford was ranked sixth by global sales with 4.4 million vehicles sold in 2023.
• A California House bill that is expected to be signed into law would give the California Energy Commission authority to determine the scope and timing of a potential bidirectional charging requirement for the state’s EV fleet.  A similar bill passed by the California Senate last year would have required all EVs sold in the state to have bidirectional charging capabilities by the 2030 model year.
• The U.S. Department of Energy will study the “soft costs” of deploying EV charging infrastructure such as permitting, inspections, administration and utility interconnections, that in some instances can be higher than the buildout costs of equipment and construction.
• Charging speed at public stations can be affected by factors that include constraints on the electric grid, outdoor temperature, and slower charging as the battery approaches full to avoid overheating.
• GM and EVgo will establish 400 DC fast-charging stalls at stations that will begin operating in 2025.
• EV leases in the U.S. increased by double digits in the first quarter of 2024, and currently they are above auto-industry-wide levels, according to data excerpted in Bloomberg.
• The European Union plans to vote later this month to establish definitive tariffs on imports of certain EVs made in China. The EU implemented provisional tariffs on Chinese-made EVs in July.
• Chinese automaker Geely is exploring locations for a plant in Europe, according to a report in Reuters.
• BMW and Toyota will partner to sell a new generation of hydrogen-powered vehicles beginning in 2028. This expands a previous collaboration on hydrogen vehicles between the companies that formed over ten years ago.
• German supplier Benteler Automotive received approval for a plan to establish a $105 million battery components plant at the site of a former GM facility in Wyoming, Michigan.
• In response to a large fire in South Korea that originated with an EV in a residential parking garage last month, EV makers in the nation will be required to disclose the names of their battery suppliers.

Automated, Autonomous or Connected Vehicles Technologies

• Venture capital investment in mobility technology was up 52% YOY in the second quarter of 2024, led by $2.2 billion in funding for three autonomous driving software companies, according to analysis from PitchBook released September 11.
• Amid national security concerns over risks posed by connected cars, two U.S. senators intend to launch a probe into several Chinese automakers to obtain information about their connections with the Chinese government and plans for the U.S. market.
• Automotive and technology companies in China plan to increase development of driver-assistance software and in-vehicle artificial intelligence technologies.
• Uber will offer driverless rides on Waymo vehicles in Austin, Texas and Atlanta, Georgia beginning in 2025, as part of an expanded agreement between the companies following a robotaxi collaboration in Phoenix, Arizona.

Market Trends and Regulatory

• The National Highway Traffic Safety Administration on September 8 proposed a new Federal Motor Vehicle Safety Standard intended to minimize the risk of pedestrian head injuries from front-end vehicle crashes.
• A decision by the federal government over whether to block the planned sale of U.S. Steel to Nippon Steel may not occur until after the presidential election, according to unnamed sources in Bloomberg. 
• Automakers could incur at least €15 billion in fines if they are unable to comply with EU vehicle emissions targets that are set to begin in 2025.
• Bloomberg reports the auto industry may require significant consolidation in parts of Europe due to declining vehicle sales and underutilized plants.
• As of mid-September, an agreement was not reached ahead of the September 30, 2024 expiration of the International Longshoremen’s Association (ILA) labor agreement with the U.S. East Coast and Gulf Coast port operators.