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
- The most recent article in Foley &
Lardner LLP's Auto Trends 2023 Series provides an overview
of key disruptors automotive suppliers are likely
to encounter in the near term, as well as strategies to mitigate or
even benefit from certain market developments. Click HERE to subscribe to the series.
- U.S. new light-vehicle sales volumes
in April reached 1.36 million units, and results were
comparable to
pre-pandemic levels, according to an update from
LMC Automotive. The analysis also notes
consumers are encountering higher inventory levels and rising
incentives. However, average transaction prices remain elevated and
vehicles have longer wait times.
- A number of analysts quoted in Bloomberg predict automakers
will experience downward pressure on prices in certain
regions in the months ahead, particularly for
mid-range buyers, due to the effects of diminished
supply chain constraints and a softening economy.
- The National Automobile Dealers Association's 2022 NADA Data report predicts U.S. new
light-vehicle inventory will reach 2.2 million units by the end of
2023, up from 1.7 million units at the end of 2022 and 1.1
million units at the beginning of 2022.
- UAW president Shawn Fain indicated that raising wages in
battery plants will be a key priority during
upcoming contract talks with automakers.
- Reuters reports
Stellantis and LG Energy Solution
could implement "contingency plans" for an upcoming
battery plant in Canada, due to complications with anticipated
funding from federal and provincial governments.
- Foley & Lardner Partner Craig Dillard is
quoted in the Yahoo Finance article, "Americans Aren't Buying EVs Despite Tax Cut:
Here's Why," discussing how the high demand for
lithium, an essential raw material for electric vehicle (EV)
batteries, can make the price of EVs cost-prohibitive for consumers
despite the tax incentives included in the 2022 Inflation Reduction
Act.
- Generation Z's current disinterest in vehicle ownership could be short-lived, and long-term purchasing preferences may eventually be similar to those of previous generations, according to analysis from Foley & Lardner.
OEMs/Suppliers
- The Detroit Three automakers reported strong
results for first quarter revenue and vehicle shipments.
However, Ford CFO John Lawler expressed caution regarding the company's
full-year earnings outlook due to uncertainty around issues
including rising incentives, elevated commodity
prices, and the outcome of upcoming UAW contract
negotiations.
- Toyota set a global production target of 10.1 million
vehicles for its current fiscal year ending March 31, 2024, up from
its previous fiscal year production of 9.13 million units,
according to guidance the company provided on May 10.
- Ford is reported to be temporarily holding shipments
of certain gas and electric F-150 pickup trucks
produced at three U.S. plants due to a supply chain issue
with door handles.
- The Wall Street Journal reports major
tire manufacturers are examining ways to integrate
sensors which gather and relay data about driving conditions and
road friction in real-time for autonomous vehicles, while noting
the technology has a number of technical challenges to
overcome.
- Qualcomm will acquire Autotalks Ltd., an Israel-based fabless semiconductor company devoted to vehicle-to-everything (V2X) communications. Terms of the deal were undisclosed.
Electric Vehicles and Low Emissions Technology
- BorgWarner CEO Frédéric Lissalde
discussed the company's electrification capabilities and
strategy in an interview with Crain's Detroit
(subscription).
- Increased production of electric vehicles may provide
opportunities to large Tier 1 suppliers with
strong engineering capabilities to "bring in
more of a complete solution" to OEMs, according to commentary
in Crain's Detroit
(subscription).
- Analysis from S&P Global Mobility predicts
automotive suppliers will experience significant
"displacement and disruption" if they are unprepared for
the industry shift from internal combustion engine-based
vehicles to electric vehicles.
- Toyota plans to invest 5 trillion yen ($37.2
billion) in electric vehicles by 2030, up from a previous
target of 4 trillion yen ($29.8 billion).
- Issues which may contribute to EV range
limitations include sudden stops, frequent braking,
driving against strong wind, use of the heater or air conditioning,
and loading the vehicle with passengers or luggage, according to a
report in Bloomberg.
- A number of companies announced project updates at the
Advanced Clean Transportation (ACT) Expo held in
Anaheim, CA this month:
- Daimler Truck North America debuted a Freightliner
medium-duty electric truck for pick-up and delivery applications,
and production is expected to begin later this year in Portland,
Oregon.
- Toyota and PACCAR announced an expanded agreement to develop and
produce Kenworth and Peterbilt trucks powered by Toyota's
hydrogen fuel cell modules, with initial customer
deliveries beginning in 2024.
- Navistar and infrastructure firm
Quanta Services, Inc. will provide vehicle and charging
infrastructure solutions to assist fleet customers in the
implementation of battery-electric vehicles.
- Hyundai plans to deploy 30 Xcient Class 8
hydrogen fuel cell electric trucks in northern California
beginning later this year. The initiative is part of the NorCal ZERO public-private partnership to
support the use of fuel cell electric trucks.
- Daimler Truck North America debuted a Freightliner
medium-duty electric truck for pick-up and delivery applications,
and production is expected to begin later this year in Portland,
Oregon.
- The U.S. Environmental Protection Agency
issued a request for information on the
availability of zero-emission technologies in the
heavy-duty vehicle and port equipment sectors, and
their respective fueling infrastructure needs. The purpose of the
feedback is to inform the agency prior to its moving forward with
Inflation Reduction Act funding for eligible
recipients. Comments must be received on or before June 5,
2023.
- Bloomberg reports South Korea's
top battery makers – LG Energy Solution, Samsung SDI
and SK On – plan to increase capabilities in
lithium iron phosphate (LFP or LiFePO4) batteries
to enhance market competitiveness and respond to customer demand.
Adoption of LFP batteries is expected to increase, amid efforts to lower the costs of
raw materials and reduce the use of certain commodities such as
cobalt.
- Tesla broke ground on its first lithium
refinery in Robstown, Texas, and the facility is expected
to begin operations in 2024.
- Electric SUVs and crossovers are one of the
fastest-growing segments in China, and intensified
competition will impact automakers' vehicle prices and profit
margins in the nation, according to a report in Reuters.
- Vietnam-based electric vehicle maker VinFast
intends to list in the U.S. through merger with special purpose acquisition
company (SPAC) Black Spade Acquisition Co.
- The Wall Street Journal reports rising sales of EVs are expected to impact the volume, cost and type of components needed in automotive repair. The article notes EVs have not been in use long enough to fully assess the future landscape.
Automated, Autonomous or Connected Vehicles Technologies
- Waymo plans to expand the service areas of its
existing autonomous taxi operations in Phoenix and San
Francisco.
- GM business unit Cruise plans to begin testing autonomous taxis in Houston and
Dallas, with a safety driver in the vehicles. Cruise is currently
testing or operating its vehicles in San
Francisco, Phoenix and Austin.
- State lawmakers in California advanced a bill (AB 316) which could prohibit autonomous heavy-duty trucks from being tested or commercially operated on public roads unless a human safety driver is present in the vehicle. The bill's next hearing is scheduled for May 18.
Market Trends and Regulatory
- S&P Global Mobility reports the average age of cars and light trucks in operation on U.S. roads has risen to 12.5 years. According to the analysis, this represents the sixth consecutive year of increase in average vehicle age, and the biggest yearly increase since the 2008-2009 recession.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.