Foley Weekly Automotive Report - May 2021

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Foley Weekly Automotive Report

This report helps automotive suppliers inform their legal and operational decisions to help address challenges and opportunities.

Key Developments

  • Preliminary estimates for U.S. new light vehicle sales in April predict a SAAR ranging from 16.5 to 18.1 million units, according to Cox Automotive, and J.D. Power and LMC Automotive.
  • In an earnings call last week, Ford warned of a potential volume loss approaching 1.1 million vehicles for the full year’s planned production due to the ongoing global semiconductor shortage
  • Due to the semiconductor shortage, GM announced additional downtime for five North American plants; Volkswagen’s Mexico unit will stop production for certain vehicles in Puebla this month, and Nissan announced several days of downtime in May for its North American plants.
  • Intel CEO Pat Gelsinger estimated it may take “at least several months” for semiconductor shortages to begin easing, and chipmakers could potentially need “a couple of years” to fully meet demand across all sectors: "COVID showed that the global supply chain of chips is fragile and unable to react quickly to changes in demand."
  • MEMA in a Senate subcommittee hearing last week supported the need for federal infrastructure legislation as one part of an approach to “prepare the U.S. for a technologically advanced transportation future,” while noting that “a single technological path” should not be mandated.
  • Lyft will sell its self-driving business unit to Toyota subsidiary Woven Plant Holdings for $550 million; larger rival Uber sold its self-driving unit last year.
  • A new report from Guidehouse Insights ranks Waymo, Nvidia, Argo AI and Baidu among the leading companies developing automated driving systems
  • China is considering regulations that would require data collected by external vehicle cameras to be stored within the country
  • Electric vehicles and low emissions technology:
    • GM will invest $1 billion to ready its Ramos Arizpe, Mexico, plant to produce EVs beginning in 2023; this marks the automaker’s fifth plant in North America dedicated to EVs.
    • The UAW indicated that it is working with the Biden administration in an effort to establish a requirement for U.S. vehicle assembly for qualifying EV tax incentives and subsidies.
    • Electric car registrations increased 41% in 2020, reaching a 4.6% sales share globally, according to a new report by the International Energy Agency.
    • With its new Ultium Charge 360 program, GM will partner with seven charging providers to enable EV customers to locate charging stations in the U.S and Canada.

Market Trends and Regulatory

  • In a Senate subcommittee hearing last week on “Driving Innovation: The Future of Automotive Mobility, Safety, and Technology,” the Motor & Equipment Manufacturers Association (MEMA)stated its support of federal infrastructure legislation as part of a plan to “prepare the U.S. for a technologically advanced transportation future,” while noting that “neither the current rate of consumer adoption of EVs nor existing levels of federal support” is adequate to achieve goals of a net-zero emissions future, and “a single technological path” should not be mandated. During the hearing, the Alliance for Automotive Innovation identified supply chain development, electrification, vehicle automation and enhanced safety technology deployment as “key areas critical to modernizing and advancing mobility.”
  • Sen. Tom Carper (D-Del.) sent a letter to the Environmental Protection Agency urging a federal commitment to phase out the sale of new gasoline-powered passenger vehicles by 2035. Carper chairs the Senate Environment and Public Works Committee. The Biden administration has thus far not endorsed a ban on new ICE-powered vehicles by a specific date.
  • China is considering regulations that would require data collected by external vehicle cameras to be stored within the country, according to a draft posted on a government website that is open for public comment until May 15.
  • UAW President Rory Gamble could potentially retire in advance of his June 2022 term completion, according to an interview last week with CNBC.

OEMs/Suppliers

  • Production cuts caused by the semiconductor shortage - In its most recent earnings call, Ford indicated the chip shortage could cause a loss of up to 700,000 units in Q2, representing 50% of its planned production, and following a production loss of 17%, or 200,000 units, in Q1. The automaker expects a production loss of 10% in the second half of 2021, for a potential total volume loss approaching 1.1 million vehicles for the full year.
    • GM extended the shutdown of its Fairfax Assembly plant in Kansas through the first week of July; this plant produces the Cadillac XT4 and Chevrolet Malibu and has been down since February 8; the automaker’s Lansing Grand River assembly plant in Michigan is scheduled for downtime May 10 through the week of June 28, impacting production of the Chevy Camaro and Cadillac CT4 and CT5; CAMI Assembly in Ingersoll, Ontario, has been down since February 8 and will remain down through June 28, affecting production of the Chevrolet Equinox; in Mexico, San Luis Potosi Assembly will be down the weeks of May 17 and May 24, impacting production of the Equinox, Chevy Onix and GMC Terrain, and Ramos Assembly will be down May 3 through the week of May 24, impacting production of theChevy Blazer and Equinox.
    • Volkswagen’s Mexico unit will stop production lines in Puebla for its compact Tiguan crossover from May 6 to May 16, and its compact Jetta sedan from May 3 to May 19. Nissan has scheduled several days of downtime this month at plants in Canton, Mississippi; Smyrna, Tennessee; and Aguascalientes, Mexico. BMW will stop Mini production for three days beginning April 30 in Oxford, England; a plant in Regensburg, Germany, will also have shift reductions. Honda scheduled downtime of up to six days this month for three plants in Japan.
  • Toyota temporarily stopped production at three plants in Ontario when its supplier, Toyotetsu, voluntarily halted operations after eight employees tested positive for COVID-19 “over the past few weeks.” Toyotetsu announced the closure April 26, and said “the vast majority of these cases have not been linked to on-site transmission” at its facility. The supplier is working with a local health unit to determine a safe date to reopen.
  • Toyota announced it will invest $803 million in its facility in Princeton, Indiana, to produce two new, three-row SUVs. One of the new vehicles will be under the Lexus brand, with details to be announced at a later date.

Connected/Autonomous Vehicles and Mobility Services

  • The first major deal for Toyota’s newly formed Woven Planet is the acquisition of Level 5, the self-driving division of Lyft. The transaction is expected to close in Q3 2021. Lyft indicated the sale will help it save $100 million in operating expenses and that it will reach profitability on an adjusted basis sometime in the third quarter of this year.
  • The latest leaderboard report from Guidehouse Insights assesses 15 companies developing automated driving systems. Leading companies include Waymo, Nvidia, Argo AI and Baidu, while contenders include Cruise, Zoox, Mobileye, Nuro, and several others. [Executive summary is a free download; full report has to be purchased].
  • Stellantis will expand its Car on Demand subscription service to six states in the U.S. this year, beginning with Los Angeles. The Free2Move service first launched in Europe in 2019.
  • Autonomous truck startup Plus is reported to be in discussions for a potential SPAC deal with Hennessy Capital Investment Corp. V. Cupertino, California-based Plus focuses on long-haul trucking and has investors including Shanghai Automotive Industry Corp., GSR Ventures Management and Sequoia Capital.
  • Velodyne Lidar will be the exclusive supplier of lidar sensors used to power the autonomous driving system on Faraday Future’s FF 91 luxury electric car, which is due to launch next year.

Electric Vehicles and Low Emissions Technology

  • GM’s Ramos Arizpe, Mexico, site will become the automaker’s fifth plant in North America designated for producing EVs. The other sites are Orion Assembly in Michigan; Factory Zero Detroit-Hamtramck Assembly Center; the Spring Hill assembly plant in Tennessee, and the CAMI plant in Ontario.
  • GM will partner with seven charging providers to establish access to an EV charging network via its new Ultium Charge 360 program, which will provide real-time information via a mobile app to assist customers in finding a charging station. The providers are Blink Charging, ChargePoint, EV Connect, EVgo, FLO, Greenlots and SemaConnect.
  • Ford will invest $185 million to build a research and development lab in southeastern Michigan dedicated to electric vehicle batteries. Ford Ion Park will initially have 150 employees and is scheduled to open by the end of 2022. This development is a pivot from former Ford CEO Jim Hackett’s statement last summer that the automaker would not invest capital into owning its own battery facility, and there was “no advantage in the ownership in terms of cost or sourcing.”
  • A joint venture between Daimler Truck and Volvo Group intends to manufacture fuel cells for trucks in Europe beginning in 2025. The companies announced the formation of a joint venture, cellcentric, late last year.
  • Huawei is rumored to be in discussions to acquire a controlling stake in the EV unit of Chinese automaker Chongqing Sokon. The telecom giant previously announced it is investing $1 billion to develop autonomous and electric technologies in partnership with domestic automakers.
  • Ford and BMW led a $130 million Series B funding round in solid-state battery maker Solid Power, and representatives from both automakers will join the board of the Colorado-based company.

Prepared by Julie Dautermann, Competitive Intelligence Analyst 

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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