Automotive Supply Chain Risk Digest #354
November 17 - 23, 2023, by Elm Analytics
Dear Readers,
In this season of gratitude, we at Elm Analytics want to express our heartfelt appreciation to you.
Your ongoing interest and support of the Automotive Supply Chain Risk Digest fuels our commitment to delivering insightful and valuable content through the Automotive Supply Chain Risk Digest.
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Warmly,
Nick Gaydos
Editor, Elm Analytics
Closing
Goodyear is closing its Fulda and Fuerstenwalde tire plants in Germany, cutting 1.7k jobs. The announcement came after the release of their new transformation plan and the news that their CEO will retire next year.
Disaster
The Galaxy Leader, a pure car and truck carrier (PCTC) chartered by NYK Line, was hijacked by Houthi rebels in the Red Sea near Yemen on November 19. The ship, owned by Galaxy Maritime and commercially managed by Ray Car Carriers, was en route to India from Turkey.
Despite carrying no cargo, the ship's seizure, captured in video, is linked to claims by the Houthi rebels of its association with Israeli shipping. NYK has set up a crisis management center, prioritizing the safety of the 25 crew members. Japan's government condemned the act and is working with regional authorities for the vessel's swift release.
Expanding
The Port of Brunswick, Georgia, has introduced a new short-sea service to transport automotive vehicles from Mexico. This initiative is part of the Georgia Ports Authority's strategy to handle increasing auto and machinery volumes related to nearshoring, which saw a 61% year-over-year increase at the Colonel's Island Terminal in September.
Human Capital
Auto suppliers and economists attribute a significant labor shortage ($) throughout the automotive supply chain to reduced legal immigration levels in the US. The labor force participation rate in the US has declined over the years, and the Gen Z population being smaller than millennials exacerbates the issue.
"We expect it to continue to decline as the population ages… We haven't had any meaningful immigration. That, obviously, is going to impact the bottom of the market significantly. The availability of new workers coming in is going to be a problem."
- Michael Robinet, S&P Global Mobility
The number of new US immigrants is still lower than in previous decades, impacting labor availability.
Industry Directions
Cruise, GM's AV tech subsidiary, under former CEO Kyle Vogt, pursued rapid expansion, launching commercial driverless service in San Francisco and planning further international growth. This aggressive strategy, amidst existing problems in the primary San Francisco market, has been criticized as ‘self-sabotage.’ ($)
Following a series of problematic incidents, including a robotaxi dragging a pedestrian, California regulators suspended Cruise's permits. Leadership changes ensued, with Vogt resigning and new appointments made, as the company faces a critical restructuring phase.
The developments at Cruise reflect the challenges in balancing technical innovation with regulatory compliance and public safety in the autonomous vehicle sector. The situation underscores the importance of strategic decision-making and responsible scaling in emerging tech industries.
Mergers, Ventures, Acquisitions
Sweden's Northvolt has developed a "breakthrough" sodium-ion EV battery that does not rely on lithium, nickel, graphite, or cobalt. This innovation could significantly reduce Europe's energy and EV industries' dependency on scarce raw materials from China.
Northvolt's sodium-ion battery is seen as a key advancement in Europe's diversification of its supply chains and use of alternative technologies to mitigate reliance on specific global regions for critical materials.
BYD's FinDreams battery division has partnered with Huaihai to establish what they plan to be the world's largest sodium-ion battery facility in Xuzhou, Jiangsu, China, with an annual production capacity of 30 GWh. Sodium batteries once had a considerable cost advantage over lithium-based cells, but lithium carbonate prices have fallen 70% since the beginning of the year.
Stellantis and CATL have signed a preliminary agreement to build a gigafactory in Europe to produce lithium iron phosphate (LFP) batteries, aiming to offer affordable EVs in various segments. The location and capacity of the proposed factory are yet to be finalized, and the project aligns with the EU's efforts to establish a local EV battery supply chain.
Opening
In partnership with Suzuki, Toyota will establish a third manufacturing plant in Karnataka, India, responding to increasing demand. Near Toyota's two existing plants, the new $400M facility is expected to employ 2k workers with an annual capacity of over 100k vehicles.
NHK Spring announced plans to construct a new plant (pdf) in Irapuato, Guanajuato, Mexico, to boost the production of motor cores.
Jabil, an electronics systems provider, has officially inaugurated a 250k sq ft plant, its third production facility on the site in Chihuahua, Mexico.
INEOS Styrolution and SINOPEC have opened a new ABS facility in Ningbo, China. The 26.7-hectare facility has an annual capacity of 600k tonnes.
Aptiv will build a high-voltage connector manufacturing facility ($) in Wuhan, China. The $280M factory is expected to begin production in H1-2025.
Production Decrease
VW faces a significant reduction in EV production due to a shortage of the APP550 drives from its component plant in Kassel, Germany. This issue impacts not only VW's Zwickau and Emden, Germany, plants but also Skoda's output in Mlada Boleslav (Czech Republic) and Hefei (Anhui, China).
The new APP550 motor, which is more powerful and efficient than its predecessor, is integral to several VW Group models, including ID.4, ID.5, ID.7, Audi Q4 e-tron, Skoda Enyaq, and Cupra Tavascan.
Audi is delaying the launch of several critical EV models ($), including the Q6 e-tron, which will launch in Q3-2024, around two years later than initially planned. The delay in the Q6 e-tron's launch, which will be built in Ingolstadt and is the first Audi model based on the Premium Platform Electric (PPE), is also causing subsequent models to be pushed back.
These delays are part of a revision process initiated by Audi's new CEO, Gernot Döllner. Additionally, Audi is reconsidering its approach to the successor of the Q8, with plans to redesign the vehicle to serve as a basis for an upcoming VW SUV, the successor to the Atlas.
Toyota's foray into solid-state batteries is set to begin around 2027-2028, with a limited initial supply for only a few thousand vehicles. Despite being heralded as a game-changer for EVs, offering higher energy density, faster charging, and safer usage, Toyota's "mass production" phase in 2030 will only be sufficient for just over 10k vehicles.
This limited impact is due to the challenges in manufacturing these advanced batteries at scale. Toyota and Idemitsu Kosan's collaboration aims to develop a sulfide solid electrolyte for these batteries, with mass production increasing to several thousand tons by 2030.
Ford will resume building its EV battery plant in Marshall, Michigan, albeit at a reduced scale (gift) due to slower EV adoption and rising labor costs. The revised plan includes 1.7k jobs instead of 2.5k, with production to start in 2026.
The plant's output capacity target has gone from 35 GWh to 20 GWh annually, sufficient to equip approximately 230k vehicles. Ford's decision to scale back the project follows concerns about competitive pricing and the impact of its new UAW contract that raises top wages by 25%.
Regulation
The Biden administration has finalized a rule that mandates state transportation departments to set targets for reducing greenhouse gas emissions linked to transportation on national highways. This rule, proposed in 2022, does not specify how low these targets should be but creates a system for states to establish and track these emission reduction goals independently.
Shutdown
Production of the Jeep Gladiator halted last week due to a strike by workers at Hyundai Mobis in Toledo, Ohio. Hyundai Mobis, responsible for producing the chassis for the Gladiator, saw about 400 of its workers walk off the job, primarily over issues related to eliminating pay tiers.
Supply Chain
The auto industry's return to production post-UAW strike has brought to light the precarious financial condition of many smaller suppliers. These suppliers are struggling to ramp up their operations ($) due to financial constraints resulting from the strike. Consequently, some are extending furloughs and 4-day workweeks as cost-saving measures.
This situation underscores the fragility and interconnectedness of automotive supply chains, where the failure of even one supplier can have significant ripple effects across the industry. The recent bankruptcy of Unique Fabricating illustrates this vulnerability and the measures automakers and Tier 1 suppliers are forced to take to ensure continuous production.