Automotive Supply Chain Risk Digest #360

December 29, 2023 - January 4, 2024, by Elm Analytics

Bankruptcy

The planned agreement for a share sale between China Evergrande New Energy Vehicle Group and US-listed NWTN has fallen through.

According to a filing made by the company to the Hong Kong Stock Exchange, the deal was initially expected to involve issuing 6.2B new shares to Dubai-based NWTN for a total of $498M.

However, the parties could not agree on extending the deadline, which had been set for the end of 2023. This development is a significant shift in the financial strategy of the Evergrande New Energy Vehicle Group, which is currently facing financial difficulties.

Faraday Future has recently been notified by the Nasdaq exchange for non-compliance with their listing rules. The issue stems from the company's failure to meet the minimum closing share price requirement of $1.

This non-compliance is one of many struggles Faraday Future has been facing lately, including a significant decrease in share value, supply chain problems, a cash shortage, and a disagreement over governance, resulting in a board reshuffle.

In all, US commercial bankruptcy filings increased by a dramatic 72% in 2023, driven by higher interest rates and the end of pandemic-era financial support.

Change In Management

Nicolas Lopez Appelgren, a long-time Volvo executive, has been appointed as the new international boss of Geely's Lynk & CO brand, succeeding Alain Visser.

Visser, who joined Geely Auto Group in 2015 and became CEO of Lynk & CO International in 2017, played a crucial role in establishing Lynk & CO, particularly in growing its European sales using a subscription model.

Cyber Security

Automotive dealerships face increasing cybersecurity risks $ in 2024 due to new regulatory requirements and evolving threats. The FTC's Safeguards Rule mandates stricter consumer data protection, and SEC rules require public companies, including dealerships, to disclose cybersecurity breaches.

Rising cyber insurance costs and reduced coverage add to the pressure. New threats include sophisticated attacks and vulnerabilities in vehicles' computerized systems and third-party software.

The heightened cybersecurity challenges for dealerships underscore the evolving landscape of digital threats in the automotive industry, emphasizing the need for robust and adaptive security measures to protect data and operations.

Earning Dip

Mobileye announced a lower-than-expected full-year revenue forecast for 2024. The Israeli autonomous driving technology firm, now anticipating revenues between $1.8B and $1.9B, attributes this revision to customer inventory buildup of ADAS chips post-pandemic.

Industry Directions

China's automotive industry is facing a shift $, with stagnant domestic demand and a surge in exports. Despite predictions of record-high vehicle shipments reaching 30M in 2023, growth is primarily driven by exports, not internal demand.

Global automakers like Kia and Ford increasingly export gasoline vehicles from China to emerging markets. This trend represents a significant change in the Chinese automotive market, highlighting the need for global automakers to adapt to changing demand dynamics and China's growing role as a substantial vehicle exporter.

Opening

Vietnamese electric vehicle manufacturer VinFast plans to set up its first battery manufacturing facility in India, specifically in Thoothukudi City of Tamil Nadu. This move is separate from its previous announcement regarding vehicle assembly plans.

Production Increase

The US auto industry experienced its best full-year sales total $ since 2019, with a significant 13% increase to 15.6M vehicles in 2023. However, signs of a cooling market are emerging for 2024, with challenges such as elevated borrowing costs and high new vehicle prices potentially impacting consumer demand.

US Automotive Manufacturers - 2023 Total Production - Y/Y % Change:

• General Motors - 2578k - ↑ 14%

• Toyota Motor NA - 2248k - ↑ 7%

• Ford Motor Co - 1981k - ↑ 7%

• Hyundai-Kia - 1653k - ↑ 12%

• Stellantis - 1534k - ↓ -1%

• American Honda - 1308k - ↑ 33%

• Nissan Group - 899k - ↑ 23%

• Tesla Motors - 670k - ↑ 37%

• Subaru of America - 632k - ↑ 14%

• VW Group - 565k - ↑ 14%

• BMW of NA - 398k - ↑ 9%

• Mazda NA - 363k - ↑ 23%

• Mitsubishi Motors NA - 87k - ↑ 2%

  

BYD surpassed Tesla as the top EV maker in Q4-2023 by selling more incentivized battery-powered vehicles.

Recalls

Ford recalled 112k 2019→2021 F-150 trucks due to faulty rear axles. The defect, involving damaged axle-hub splines, poses a risk of the trucks rolling away if the parking brake isn't engaged, thereby increasing the likelihood of accidents.

Regulation

Despite recent Treasury guidelines and a dip in VC deals, the hydrogen fuel sector for commercial vehicles remains promising $, with major manufacturers investing in hydrogen-fueled vehicles.

Shutdown

Daihatsu Motor, a subsidiary of Toyota, will compensate lower-tier contractors in its supply chain following an indefinite production halt due to a safety scandal.

Although already paying 423 direct suppliers, Daihatsu faces a broader impact, with over 4k supply chain companies and 1k associates affected.

The suspension, lasting until the end of January, follows safety-inspection irregularities. Financial details are unclear, but Toyota's chief communications officer, Jun Nagata, expressed full support, including potential dealer and supplier compensation loans.

Supply Chain

The Red Sea crisis, caused by attacks from Iran-backed Houthi militants in Yemen, has led to a significant diversion of trade, impacting global shipping and trade dynamics.

This diversion, estimated at over $200B, has increased freight rates, extended shipping times, and raised inflation concerns. The crisis has forced carriers to reroute ships, notably around South Africa's Cape of Good Hope, leading to longer journeys and higher costs.

This situation exacerbates existing challenges in the shipping industry, including underutilized vessel capacity and manufacturing order reductions.