Foley Automotive Update

Key Legal Insights from Foley’s Automotive Team

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. 

AUTOMOTIVE KEY DEVELOPMENTS

• 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 Compliance and Enforcement in Global AI Regulation: EU AI Act Risks and International Regulatory Challenges. Subscribe here to get updates about new articles in this series.
• First-half 2026 U.S. new vehicle sales fell 2.8% year-over-year and reflect a SAAR of 15.9 million units, according to data from the National Automobile Dealers Association. The analysis notes that direct comparisons to first-half 2025 are challenging due to “significant pull-ahead volume” as consumers purchased vehicles before tariffs were imposed.
• Edmunds reports new vehicle affordability pressure reached new highs in Q2: a record 24% of borrowers selected auto loans of 84 months or longer, the average new-vehicle payment reached an all-time high of $777, and 20% of buyers paid $1,000 or more per month.
• Crain’s Detroit reported on GM’s rollout of a “first-of-its-kind” manufacturing automation initiative for suppliers.
• The U.S. Senate Commerce Committee is expected to vote in the coming days on the Connected Vehicle Security Act of 2026, which would ban from the U.S market the “importation, integration, manufacture, sale, and resale of connected vehicles, software, and hardware linked to China or other foreign adversaries.” The bill’s sponsors, Sens. Bernie Moreno (R-Ohio) and Elissa Slotkin (D‑Mich), referenced the importance of codifying related rules from the Commerce Department into law. A similar bill is pending in the House.
• Crain’s Detroit provided an update on recent UAW efforts to secure significant wage gains from automotive suppliers.
• New vehicle sales within China declined by 20.2% year-over-year in the first half of 2026, amid reduced EV subsidies, consumer hesitancy, and market saturation in certain areas.

TRADE/TARIFFS

• Foley & Lardner partner Nicholas Ellis shared insights in the Law360 article, “Transportation Regulation To Watch: Midyear Report 2026,” discussing the status of the United States-Mexico-Canada Agreement (USMCA) and the implications for cross-border trade. This follows the U.S. decision to not automatically renew the USMCA in its current form for another 16 years. While the USMCA remains in force until 2036, this decision results in scenarios that include prolonged negotiations, annual reviews, or separate bilateral trade agreements within North America. Any nation in the trilateral agreement may invoke Article 34.6to provide six months’ notice to exit the USMCA.
• Automotive News reported on the next phase of U.S. – Mexico negotiations over the USMCA. The U.S. and Mexico are scheduled to meet the week of July 20 in Mexico City. In a July 2 press event, Economy Minister Marcelo Ebrard indicated that Mexico’s main goals in upcoming bilateral talks include reducing Section 232 tariffs on steel, aluminum and vehicles.
• Canada-U.S. Trade Minister Dominic LeBlanc stated that Canada is prepared to have discussions for bilaterial trade deals. Lowering U.S. tariffs on steel, aluminum and autos remains a key priority for Canada. Formal bilateral negotiating rounds between Canada and the U.S. have not yet been scheduled.
• Ford was one of more than 1,500 companies that submitted written comments before last week’s public hearing with the U.S. Trade Representative seeking product exemptions from proposed levies tied to Section 301 investigations into forced labor and unfair trading practices by dozens of trading partners.
• Confirmed traffic through the Strait of Hormuz over the weekend fell to just 19 ships, following the collapse of an interim U.S. – Iran peace deal.
• The Gordie Howe International Bridge over the Detroit River is scheduled to open July 27, 2026, with the “support of the United States Government.” Canada’s Auto Parts Manufacturers’ Association (APMA) has estimated that US$29 billion worth of American-made auto parts enters Canada in a typical year, the majority of it through Windsor.

OEMs/SUPPLIERS

• Toyota announced plans to move production of its Tacoma midsize truck from a plant in Mexico to San Antonio as part of a $3.6 billion investment that will double the size of the Texas facility by 2030. The decision comes as certain automakers with operations in Mexico are expected to consider alternative production plans in the nation, amid growing uncertainty over U.S.-Mexico trade policies.
• Chinese EV maker Leapmotor began selling the B10 compact SUV in Mexico through Stellantis’ local dealership network. Stellantis has an approximately 21% stake in the startup.
• Bosch was awarded up to $225 million in incentives from the Department of Commerce’s CHIPS Program Office to support the up to $2 billion the company is investing to transform its Roseville, California site for the production of silicon carbide (SiC) semiconductors.
• Micron Technology signed supply agreements to provide Ford and GM with automotive memory chips. This comes as semiconductor manufacturers increasingly prioritize AI data center demand, causing supply constraints for other applications.
• Continental will sell its ContiTech industrial unit to an affiliate of private equity firm Lone Star Funds for $4.6 billion. The deal reflects Continental’s pivot to become a pure-play tire manufacturer.
• Volkswagen announced plans to cut its model lineup by up to 50% to further reduce production capacity and costs. Germany’s automotive lobby, VDA, urged swift action to strengthen the European auto industry’s competitiveness amid its “ongoing crisis,” including opening domestic plant capacity to foreign manufacturers to help protect jobs.
• Mitsubishi will partner with startup Highlanders Inc. to develop humanoid robots, with production scheduled to begin in Japan in 2027. Manufacturers of humanoid robots are expected to receive increased attention on safety measures to prevent harm to humans as the machines enter more workplaces, according to a report in The Wall Street Journal.

AUTONOMOUS TECHNOLOGIES AND VEHICLE SOFTWARE

• The National Highway Traffic Safety Administration (NHTSA) called on autonomous vehicle developers to improve robotaxis’ ability to interact with first responders and emergency vehicles on roadways.
• NHTSA is considering ending the requirement for fully autonomous vehicles to have traditional steering wheels, according to comments made during a CNBC interview. The comments follow NHTSA’s proposal last month to revise the Federal Motor Vehicle Safety Standards (FMVSS) to remove manual braking control requirements for vehicles built only for driverless operation.
• Forvia Hella subsidiary Ignite collaborated with Oxford Semantic Technologies to develop Hella Ignite.Drive, which utilizes “knowledge-based AI” to translate traffic laws into machine-readable rule sets for autonomous driving capabilities.
• Xpeng recently debuted X-Mind, a framework that embeds predictive world model capabilities to autonomous driving systems, enabling vehicles to simulate near-term changes before acting.
• GM-backed Momenta raised $751 million in its Hong Kong IPO, valuing the autonomous driving company at approximately $9 billion. However, a muted trading debut this month may signal investor caution about market competition, as well as the timetable for autonomous driving companies to sustain profitability.

MARKET TRENDS AND REGULATORY

• The U.S. Environmental Protection Agency (EPA) urged a federal court to dismiss California’s lawsuit over the Trump administration’s efforts to have Congress invalidate the state’s Clean Air Act waivers.
• The U.S. Department of Justice intervened in another lawsuit pertaining to California’s emission rules for heavy-duty trucks, asserting that the Clean Air Act prohibits states from enforcing or adopting their own emissions standards for new vehicles.
• The EPA announced a proposal to change pollution rules for heavy trucks that includes the elimination of Diesel Exhaust Fluid (DEF) deratements, which the agency said will restore lost productivity and save up to $6,000 on each new vehicle purchase.
• The Wall Street Journal reported on NHTSA’s challenges in eliminating supplies of banned counterfeit and faulty air-bag components that may be installed during post-crash vehicle repairs. At least 10 U.S. fatalities have been linked to defective inflaters since 2023.

HYBRID AND ELECTRIC VEHICLES

• Second-quarter 2026 new EV sales declined by 20.5% YOY and accounted for 5.8% of total U.S. new vehicle sales, according to Kelley Blue Book estimates. Full-year 2026 new EV sales are forecast to drop 2.2% YOY.
• First-half 2026 conventional hybrid vehicle sales rose 19.4% YOY and represented 15.4% of total U.S. new vehicle sales.
• EV startup Lucid Group announced it hired restructuring consultancy AlixPartners to assist with improving execution and strengthening operations.
• Electric big rig startup Windrose Technology is facing regulatory scrutiny over claims of unpaid wages and discrepancies in the production locations within trucks’ Vehicle Identification Numbers.
• Former Canoo Inc. executives reached a $20 million settlement to resolve allegations the bankrupt EV startup misled investors.