Foley Weekly Automotive Report – Transport

This report helps automotive suppliers inform their legal and
operational decisions to help address challenges and opportunities.
Contact your Foley relationship partner, or John R.
Trentacosta or Ann Marie Uetz, to follow up.

Key Developments

• U.S. new light-vehicle sales in July are
  forecast to reach a SAAR of 15.0 million to 15.2
  million units, according to estimates from J.D. Power and LMC Automotive, and Cox Automotive, respectively.




• Ford, Volkswagen and Nissan increased full-year
  earnings guidance based on the strength of second
  quarter earnings reports.




• GM  extended downtime at five
  North American plants
  in Michigan, Tennessee, 
  Kansas and Mexico due to
  the chip shortage.




• Ford returned to a mandatory mask
  requirement regardless of vaccination
  status for its facilities in Missouri,
  Florida  and Kentucky  due
  to rising COVID-19 cases,  and the
  automaker will now require U.S. employees to be fully
  vaccinated for COVID-19 prior to international business
  travel. Stellantis resumed a mask requirement for its
  facilities
  in Illinois and Indiana.




• The U.S. Senate revealed a bipartisan infrastructure bill that that
  would authorize roughly $1 trillion in spending over
  eight years; the bill is headed for debate in the
  Senate.




• The Biden administration could
  release updated fuel-efficiency
  standards for new light vehicles as soon as this
  week.




• U.S. Rep. Debbie Dingell
  (D-Michigan) introduced a bill intended to address the effects of
  the microchip shortage on the auto industry by
  investing $2 billion on domestic semiconductor
  manufacturing for mature technology nodes.




• Companies including Disney, Walmart, Facebook and Google have recently
  announced COVID-19 vaccine
  requirements with varying timetables and impact on
  their workforces; most large manufacturers have thus far not
  mandated vaccines, according to The Wall Street Journal.




• Uber, Twitter, Google,
  Apple and Netflix are
  among the companies delaying planned returns to in-person
  work due to the spread of the delta variant. Much of
  the San Francisco Bay Area will return to indoor mask mandates this week
  regardless of vaccination status.




• Electric vehicles and low emissions
  technology:

  • According to Bloomberg, the Biden administration is in the
    early stages of discussions with the UAW and automakers
    to commit to a 2030 sales target for
    EVs;  no details have been confirmed, but unnamed
    sources speculate the target could be as high as 40%.

  
  

  • Ford COO Lisa Drake said its capital
    expenditures on electric vehicles will surpass internal combustion
    engine vehicles by 2023; the automaker previously announced that EVs will represent 40% of
    its global sales by the end of the decade.

  
  

  • Tesla  produced over 206,000
    vehicles, exceeding a quarterly profit of $1 billion
    for the first time in the company’s history in
    its Q2 2021 earnings results from April -
    June.

  
  

  • Hyundai and LG Energy
    Solution announced plans to form
    a 50/50 joint venture that will
    invest $1.1 billion to build a battery cell plant in
    Indonesia, with construction scheduled to be completed in
    the first half of 2023.

  
  

  • Ford selected Romulus, Michigan, as the site
    of its previously announced “Ion
    Park” global battery center.  The automaker
    will invest $100 million to refurbish an
    existing 270,000-square-foot facility that
    will employ up to 200 engineers. The site has
    received tax breaks through a
    “renaissance zone designation” from the Michigan Economic
    Development Corp.

Market Trends and Regulatory

• J.D. Power and LMC Automotive forecast
  total new-vehicle sales in the U.S. to reach 1.31
  million units in July, representing a 2.7% increase from
  July 2020 and a 12.4% decrease from July 2019, with the decline
  attributed to weak fleet sales.  The seasonally adjusted
  annualized rate (SAAR) for total new-vehicle sales is projected to
  be 15.0 million units, representing an
  increase of 0.4 million units from July 2020, and a decrease of 1.9
  million units from July 2019.  The same forecast notes
  that inventory constraints have weakened
  the pace of U.S. retail sales, but persistent strong
  demand  is expected to increase average
  transaction prices above $41,000  for the first
  time.  Cox Automotive predicts U.S. new light-vehicle
  sales will reach 1.33 million in
  July, representing a SAAR of 15.2 million
  units,  down from 15.4 million units in June.




• The Biden administration issued a proposal to require
  a higher level of American-made products in the
  “Buy American” program for government
  procurements. Under the proposal, products procured by federal
  agencies would increase to 60% from a current level of 55%
  American-made parts, with the requirement increasing to 65% by 2024
  and 75% by 2029.




• A report released last week by
  the American Automobile
  Association found that in-dash fuel economy displays
  in tested vehicles were off by an average of 2.3%, noting
  that drivers take an “unnecessary risk” if
  they overly rely on the “miles-to-empty”
  displays.




• According to the U.S. Energy Information Administration
  (EIA), U.S. CO2 emissions from energy consumption
  decreased by 11% in 2020, reflecting the largest annual
  decrease on record, as the COVID-19 pandemic reduced mobility and
  economic activity. The EIA noted that CO2 emissions
  are forecast to increase by 7% in 2021.

OEMs/Suppliers

• Production impact of the semiconductor
  shortage –  GM extended downtime into the week of August
  2 for Lansing Delta Township
  Assembly in Michigan, 
  Spring Hill
  Assembly in Tennessee and 
  Ramos Assembly  in Mexico, and
  through the week of August 16 for San Luis Potosi
  Assembly in Mexico; the four
  plants have been down since the week of July 19.The automaker also
  added four weeks of downtime to its Fairfax Assembly
  plant  in Kansas; this plant
  will resume limited production the week of September 20, and has
  been down since the week of February 8.The automaker intends to
  resume pickup truck production the week of August 2
  at Flint Assembly
  plant in Michigan, Ft. Wayne Assembly
  plant in Indiana 
  and Silao Assembly
  plant in Mexico.

  • Stellantis  will stop production of the Jeep Gladiator
    pickup truck at its Toledo South Assembly
    Plant in Ohio the week of
    August 2, marking the first time this vehicle has been impacted by
    the chip shortage.




• Toyota  will suspend production at two Japanese plants
  for an unspecified number of days as rising COVID-19
  cases in Southeast Asia disrupt parts
  supplies. Last month, the automaker stopped production for
  several days at three plants in Thailand due to the
  impact of COVID-19 cases on one of its local suppliers.




• 
  Ford, Volkswagen and 
  Nissan raised full-year earnings
  outlooks after reporting profitable second quarter
  financials: Ford reported a second quarter profit of $561
  million due to strong demand, lower incentives, and a favorable mix
  of more profitable vehicles; the automaker increased full-year
  earnings guidance to $9 billion to $10 billion, from a previous
  forecast of $5.5 billion to $6.5 billion. Volkswagen
  Group expects its adjusted operating
  return on sales to rise to between 6% and 7.5%, from a previous
  guidance of 5.5% to 7%; while noting that the impact of the
  semiconductor shortage is expected to be “more
  pronounced” in the third
  quarter. Nissan expects an operating profit of 150
  billion yen ($1.4 billion) for the fiscal year ending March 2022,
  up from a previous guidance that it would break
  even.

Connected/Autonomous Vehicles and Mobility Services

• While progress is expected to continue in the development of
  autonomous vehicles, some in the industry are predicting the near-term
  focus will shift from full autonomy to advanced
  driver-assistance systems (ADAS).




• U.K.-based autonomous vehicle
  company Arrival announced it has successfully completed a test run of its
  automated driving system at an unnamed parcel facility.

Electric Vehicles and Low Emissions Technology

• In its most recent earnings
  results, Tesla suggested that production
  of its Cybertruck pickup could be delayed as a result of the chip
  shortage, noting that the global semiconductor
  shortage and port congestion  were key supply chain
  challenges in the second quarter.




• The founder and former head of EV startup Nikola
  Corp., Trevor Milton, has been charged with two
  counts of securities fraud and one count of wire
  fraud for misleading investors about the
  company’s products and capabilities.




• Hyundai is planning two demonstration projects of more than 30 of
  its hydrogen fuel-cell electric heavy-duty trucks in
  California. The vehicles are based on Hyundai’s Xcient
  Fuel Cell truck, which is scheduled to launch in the second quarter
  of 2023.




• Tesla agreed to pay $1.5 million to settle
  claims that a software update  for over
  1,700 Model S vehicles that was intended to reduce the
  risk of battery fires also reduced the vehicles’ battery
  range.

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.