Foley Automotive Update

Analysis by Julie Dautermann, Competitive Intelligence Analyst

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Key Developments

Foley & Lardner LLP partner Vanessa Miller commented on the risk of increased costs in the automotive supply chain that could result from new import tariffs in The Wall Street Journal article, “ Tariff Threat Prompts Automakers to Find New Suppliers, Consider Higher Prices.”
Foley & Lardner's Vanessa Miller and Ki Lee Kilgore provided an overview of contractual provisions to cope with increasing tariffs and trade wars.
Visit Foley and Lardner's 100 Days and Beyond: A Presidential Transition Hub to stay updated on policy analysis and business implications of the Trump administration across a range of areas. Content on the Hub includes a 12-step plan for multinational companies to cope with tariff and supply chain uncertainties.
President Trump's proposed 25% tariffs on U.S. imports from Mexico and Canada – paused for a “one month period” as of February 3 – could cost automakers up to $110 million daily and $40 billion annually. North American production shutdowns would be a significant risk within a week of the implementation of such tariffs, according to an executive at Canadian Tier One supplier Linamar. In addition, the price of a new vehicle could jump by at least $3,000 on average, to as much as $10,000, depending on the model.
A report in Automotive News remarked on the divergence between automakers' and suppliers' public statements on the impact of potential tariffs to the North American auto industry.
Mexico's automotive exports reached $193.9 billion in 2024 and accounted for roughly 30% of U.S. imports from the nation, according to data from INEGI excerpted in Mexico News Daily.
Vehicles and auto parts accounted for 21% of Canada's U.S. exports in the first eleven months of 2024. Canadian automotive exports were valued at over $100 billion in 2023.
At least four major automakers produce roughly 40% of their vehicles in Mexico and Canada, and of the major automakers, GM is believed to be the most vulnerable to the proposed 25% tariffs. In 2024, GM sold 2.7 million vehicles, of which over 653,000 were assembled in Mexico for export to the U.S., and at least another 235,000 were produced in Mexico for non-U.S. markets. GM models with significant U.S. import volumes included the Chevrolet Equinox and Blazer SUVs, as well as Chevrolet Silverado and GMC Sierra pickup trucks.
Approximately half of light vehicles exported by Mexico to the U.S. in 2024 were made by Detroit automakers.
TD Economics analysis indicates North American auto parts “cross all three borders up to 7 to 8 times prior to final assembly of a vehicle,” and given the high integration of North American automotive supply chains, the auto sector “would face some of the deepest negative impacts from tariffs.”
In response to President Trump's launch of new 10% tariffs on all Chinese imports, China announced retaliatory actions including import tariffs that could soon impose a 10% levy on certain U.S.-made large-engine light vehicles and electric trucks.
Foley & Lardner partner Vanessa Miller commented on certain compliance best practices in the CSO article, “ American CISOs Should Prepare Now for the Coming Connected-Vehicle Tech Bans.”
Foley & Lardner partner Nicholas Ellis described difficulties faced by automakers amid a shift in regulatory policy in the Law360 article, “Trump EV Rollbacks Spell Regulatory Whiplash For Auto Cos.”
On January 28 former U.S. congressman and Fox News contributor Sean Duffy was sworn in as the Secretary of the U.S. Department of Transportation. In his first act after being sworn in, Duffy directed the National Highway Traffic Safety Administration (NHTSA) to immediately review and reconsider all existing Corporate Average Fuel Economy (CAFE) standards for vehicles produced from the 2022 model year onward.
The Trump administration on January 24 asked the U.S. Supreme Court to pause three cases while the Environmental Protection Agency reviews previous regulatory decisions in areas that include the Clean Air Act waiver that allows California to implement its own greenhouse gas emissions standards for automobiles.
Preliminary estimates suggest U.S. new light-vehicle sales reached a SAAR of roughly 15.8 million units in January, up 5% year-over-year, but falling short of industry projections.

OEMs/Suppliers

The top five automakers ranked by 2024 global vehicles sales were Toyota, for the fifth consecutive year, followed by Volkswagen, Hyundai Motor Group, BYD and Honda. Last year, Toyota's global sales declined 3.7% YOY to 10.8 million units, Volkswagen's sales fell 2.3% to 9.03 million units, and BYD's global sales increased 41% to 4.27 million units.
GM's 2024 adjusted pre-tax earnings rose 21% to a record-high $14.9 billion last year, and total revenue rose 9.1% to $187.4 billion. However, net income fell 41% year-over-year to $6 billion, due to restructuring charges for its operations in China.
American Axle will acquire U.K.-based Dowlais Group for $1.4 billion. Dowlais' businesses include driveline systems manufacturer GKN Automotive.
Following a meeting with President Trump, Stellantis committed to opening its idled plant in Belvidere, Illinois to produce a new mid-size pickup truck in 2027. The automaker had indefinitely postponed plans to reopen the plant following an initial commitment made during the 2023 labor contract negotiations. Stellantis also announced investments to support production at existing plants in Michigan, Ohio and Indiana.
Honda will invest $1 billion, up from a previous target of $700 million, in three plants in Ohio that will have the flexibility to produce ICE, hybrid and battery-electric vehicles on the same production lines.
Nissan will reduce U.S. production by 25%, and the automaker has offered voluntary buyouts to workers at its factories in Tennessee and Mississippi. Last year Nissan announced it would eliminate 20% of its global manufacturing capacity in response to weak sales in China and the U.S.
Chinese automakers are reported to be considering purchasing surplus production lines at Volkswagen's factories in Germany.
A number of automakers have told dealers they plan to introduce lower-cost models as concerns over vehicle affordability push certain buyers out of the market.

Market Trends and Regulatory

The annual AlixPartners Disruption Index ranked automotive as the “most disrupted” major industry for the first time, reversing two consecutive years of improvement. Key concerns included a lack of real-time visibility into supply chains, the risk of tariffs and protectionism, and high costs for raw materials.
A Fifth Circuit panel invalidated the Combating Auto Retail Scams (CARS) rule issued by the Federal Trade Commission (FTC) in December 2023, after finding the FTC did not provide an advanced notice of proposed rulemaking. The CARS rule included requirements for certain dealership advertising, finance and insurance practices.
NHTSA paused a rule that would require nearly all new light vehicles to be equipped with automatic emergency braking (AEB) systems by 2029. The delay was in response to a January 20 Regulatory Freeze Pending Review Presidential Memorandum directed at executive departments and agencies. The regulation had been finalized in April 2024.
The AM Radio for Every Vehicle Act of 2025 ( S.315) was introduced in the U.S. Senate in an effort to begin a rulemaking process to require the inclusion of AM receivers as standard equipment in all passenger vehicles sold in the U.S. Similar legislation failed to reach a full floor vote last year.
Newly elected U.S. Senator Bernie Moreno (R-OH) described plans to introduce an “Automotive Freedom Act” that would restrict battery production subsidies and eliminate the leasing loophole for consumer EV tax credits. Moreno said his bill wouldseek to harmonize NHTSA's CAFE standards and the EPA's tailpipe pollution limits to “one national standard” that extends 10 years.
The Alliance for Automotive Innovation filed a lawsuit in federal court in Maine to challenge enforcement of the state's Right to Repair Law. The Alliance indicated compliance is not yet possible because the state's Attorney General has not established the “independent entity” described in the law to develop and administer data access to vehicles.
The American Trucking Association projects truck volumes will increase 1.6% in 2025, following two consecutive years of sales declines.
Among the European automakers, Volkswagen is thought to be at high risk to proposed U.S. tariffs on Mexican imports. VW has one U.S. manufacturing plant in Chattanooga, TN. However, its Puebla plant is described as the largest vehicle assembly plant in Mexico.
Volkswagen estimated it could incur up to €1.5 billion ($1.6 billion) in compliance costs and penalties this year due to stricter CO₂ emissions standards in the European Union that will apply starting in 2025.

Autonomous Technologies and Vehicle Software

Waymo plans to expand its autonomous vehicle testing to over 10 new cities in 2025, beginning with Las Vegas and San Diego.
NHTSA launched an investigation into Ford's BlueCruise automated driving system following notice of two fatal collisions involving Mustang Mach-E vehicles.
Autonomous truck developer Kodiak Robotics announced the launch of commercial operations following the sale of two self-driving trucks to oil and gas service company Atlas Energy Solutions to haul fracking sand across a 75,000 square mile area of the Permian Basin.
Toronto-based Waabi Innovation Inc. will provide its generative artificial intelligence driver system to Volvo to support the companies' joint development of autonomous trucks. Waabi Driver AI software has also been deployed in a small fleet of autonomous trucks for Uber Freight.
Acura and Honda announced a recall of nearly 295,000 vehicles due to a software issue in the fuel injection control unit that may cause vehicles to stall or lose power while driving.

Electric Vehicles and Low Emissions Technology

Automotive News provided a summary and additional context for recent EV-related policies and statements of President Trump.
Recently announced EV model cancelations include:
- While Stellantis is planning to offer an electric RAM 1500 REV pickup truck with up to 350 miles of range beginning in 2026, the automaker is reported to have canceled plans for an extended-range version of the REV with up to 500 miles of range.
- Stellantis' Chrysler Airflow EV has been postponed indefinitely. The electric SUV debuted as a concept vehicle in 2022.
- Nissan will no longer produce a crossover EV model at its Canton, Mississippi plant.
- Volkswagen no longer plans to offer an ID.7 electric sedan in the U.S. market.
ZM Trucks, a subsidiary of ZO Motors, plans to manufacture zero-emission commercial vehicles at a new plant in Fontana, California starting in the first half of 2025.
A number of automakers are suing the European Commission over opposition to the EU's import tariffs on EVs that are made in China.
Hyundai could finalize an agreement in the first quarter of 2025 to supply its re-badged commercial EVs to GM. The automakers announced a preliminary agreement last year to collaborate on parts procurement and production for certain passenger and commercial vehicles.

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