Foley Automotive Update

Analysis by Julie Dautermann, Competitive Intelligence Analyst

Foley is here to help you through all aspects of rethinking your long-term business strategies, investments, partnerships, and technology. Contact the authors, your Foley relationship partner, or our Automotive Team to discuss and learn more. 

KEY DEVELOPMENTS

• Officials from the U.S., Canada, and Mexico met virtually on July 1 to formally begin trilateral discussions for the United States-Mexico-Canada Agreement (USMCA).The U.S. did not agree to automatically renew the USMCA in its current form for another 16 years beyond its 2036 expiration date. This meeting will be followed by a separate negotiating round between the U.S. and Mexico the week of July 20 in Mexico City. Canada has not yet begun bilateral negotiating rounds with the U.S.

• An unfavorable outcome to the USMCA renegotiation could result in added costs of up to $2,000 per vehicle annually, according to AlixPartners’ Global Automotive Outlook. The report also notes “an ideal ‘USMCA 2.0’ would focus on competitiveness with China rather than Mexico or Canada,” and warns the emphasis on internal combustion engine vehicles in the U.S. could risk long-term global competitiveness.

• Foley & Lardner announced the launch of its 2026 AI in Manufacturing & Supply Chain Series, a new initiative to help industry participants identify and manage the legal risks and business strategies arising from the profound shifts and innovations reshaping manufacturing and supply chain operations. The most recent article in the series is Five Steps Every Manufacturer and Supply Chain Manager Should Take to Build a Scalable AI Governance Program. Subscribe here to get updates about new articles in this series.

• Foley & Lardner provided an update on a public comment process to help shape the next phase of U.S.-China trade negotiations. Public comments must be submitted by July 10, 2026.
• President Trump threatened in a social media post to supersede existing trade deals by imposing 100% tariffs on European nations if they pursue digital services taxes on U.S. tech companies. This follows the formal ratification by the European Union of the EU-U.S. trade agreement.

• U.S. total new-vehicle sales for the first half of 2026 are projected to reach 8.24 million units, representing an increase of 1.2% compared to the first half of 2025, according to a joint forecast from JD Power and GlobalData. The analysis predicts new light-vehicle sales in June will rise 3.6% year-over-year to reach a SAAR of 16.5 million units. Total global sales in 2026 are forecast to decline 1.9% YOY to 90.5 million units, due to market challenges that include weakening sales within China.

• U.S. new light-vehicle sales in 2026 are projected to decline by approximately 2.5% YOY to 15.8 million units, according to forecasts from Cox Automotive and AlixPartners. 
• Annual new model launches in the U.S. are expected to remain significantly below industry averages through model year 2028, according to new research from analyst John Murphy, who previously produced the annual Bank of America “Car Wars” report. The inaugural Murphy Automotive Product Pipeline also predicts that while the auto industry’s average product age will reach a record high, the number of hybrid models is expected to increase. Hybrids could reach 27% of U.S. new-vehicle sales by 2031.

• Iran emphasizedits determination to control maritime traffic through the Strait of Hormuz, ahead of the next round of peace talks scheduled to be held this week in Qatar. Transit in the waterway remains volatile following attacks on two ships in recent days.

OEMs/SUPPLIERS

• Supply constraints of DRAM chips are raising costs for certain automakers and suppliers, according to an update in Automotive News. 
• The Wall Street Journal featured an interview with the Chairman of Nissan Americas regarding the automaker’s priorities for boosting sales in the region.

• Several automakers plan to test consumer demand for compact, more affordable pickup trucks across a variety of engine types, amid a preference for selling large and more profitable models in the U.S. market.
• Ford rehired 350 engineers after its AI-powered quality tools and automated camera systems failed to match the performance of experienced employees.

• Automotive News provided updates on automakers’ and suppliers’ plans for developing and deploying AI technologies and humanoid robots.
• Nissan and Stellantis are reported to be in discussions that may result in acquiring certain assets from auto parts maker Marelli Holdings, which is restructuring after filing for bankruptcy protection a year ago.

• Bain Capital will acquire Volkswagen’s majority stake in engine and turbomachinery manufacturer Everllence for an estimated $8.4 billion.
• Certain European automakers may encounter heightened competitive risks by increasing their reliance on Chinese partners to raise production in underutilized factories, according to a report in Bloomberg. Chinese automakers are projected to collectively reach a 16% European market share by 2030, up from a current share of over 10%.

• Volkswagen is reported to be considering cutting up to 100,000 jobs and closing four German factories to save costs and improve competitiveness.
• Chinese brands account for two-thirds of new vehicles sales within China, causing Western automakers reduced profits in the market.

AUTONOMOUS TECHNOLOGIES AND VEHICLE SOFTWARE

• The National Highway Traffic Safety Administration (NHTSA) has proposed revisions to the Federal Motor Vehicle Safety Standards (FMVSS) that would remove manual braking control requirements for vehicles built only for driverless operation.
• Amazon’s Zoox revealed a redesigned robotaxi ahead of plans to begin large-scale production at its plant in California. Zoox currently offers free rides in parts of Las Vegas and San Francisco, with plans to expand services to cities that include Miami and Austin.
• U.K.-based self-driving technology developer Wayve is gaining traction with automakers seeking to advance autonomous driving capabilities.
• Several European automakers are joining forces to share code for software-defined vehicles (SDVs), betting that collaboration can significantly cut development costs and accelerate progress. However, certain industry experts are concerned that broad collaboration will impede decision-making and allow Chinese rivals to increase their market lead.

MARKET TRENDS AND REGULATORY

• The Alliance for Automotive Innovation urged the California legislature and Governor Gavin Newsom to pass a Senate bill updating “technically unworkable” requirements set to take effect July 1, 2026. The requirements address certain connected vehicle technologies that could be used by domestic violence perpetrators to track, monitor, or harass survivors.
• The Department of Commerce withdrew authorization for EV maker Polestar to sell vehicles in the U.S. due to the Connected Vehicles Rule, which restricts the import and sale of connected vehicles containing software and hardware linked to China or Russia beginning with a phased approach in the 2027 model year. This follows a recent Commerce Department decision which allows Volvo Cars, also owned by China-based automaker Zhejiang Geely Holding Group, to continue selling in the U.S. 
• Texas is close to overtaking California as the nation’s largest new-vehicle retail market, according to a new JD Power report.
• New vehicle quality improved industry-wide across all categories except infotainment, according to the JD Power 2026 U.S. Initial Quality Study.

HYBRID AND ELECTRIC VEHICLES

• Toyota started production of the RAV4 hybrid at its Georgetown, Kentucky, plant, amid a broader investment in its U.S. operations and robust consumer demand for the model.
• Ford officially started production of lithium-iron-phosphate (LFP) at its BlueOval Battery Park in Marshall, Michigan.