Automotive Supply Chain Risk Digest #386
June 21 - 27, 2024, by Elm Analytics
Contents
Ford reorganizes European management
GM appoints new CEO for Cruise
Nissan closing Changzhou plant
Toyota investing $531M in San Antonio
Auto parts suppliers adapt to EV changes
MERGERS, VENTURES, ACQUISITIONS
VW partners with Rivian for $5B
Enso plans $500M US tire factory
BYD to establish EV plant in Mexico
ONE partners with Foxconn to stabilize finances
ElringKlinger opening South Carolina facility
BMW opens press shop in South Carolina
Ferrari opens E-Building in Maranello
PowerCo starts unified cell production
VW increasing ID.Buzz production
Lithium prices continue to fall
EU revises proposed tariffs on Chinese EVs
Canada to impose tariffs on Chinese EVs
Change In Management
Ford is reorganizing its European management structure $, reducing the team in Cologne, Germany, from nine directors to a maximum of four. The move follows the departure of Martin Sander, Ford’s top executive in Europe, to Volkswagen. Christian Weingaertner and Rene Wolf will retain their roles, while two director positions remain vacant.
The restructuring centralizes control in Ford’s U.S. headquarters, streamlining operations but reducing local managerial autonomy. This shakeup comes as Ford faces declining European sales and shifts its EU focus to EVs and light commercial vans.
General Motors has appointed Marc Whitten as the new CEO of its troubled robotaxi service, Cruise. The move aims to revive its operations and reputation amidst regulatory and operational setbacks and competition from Waymo, all while facing ongoing scrutiny from the U.S. Justice Department.
Closing
Nissan is closing its Changzhou plant in China due to an inability to compete with BYD's aggressive EV price cuts. This plant, which produces about 130k units annually, accounts for 8% of Nissan's production capacity in China.
Despite China being a crucial market, Nissan's sales fell by 16% last year and another 2.8% last month. Nissan's JV with Dongfeng Motor now faces a critical issue of excess capacity, with total production capability far exceeding projected sales. The closure reflects the intense competition and market shift towards lower-priced EVs in China, prompting legacy automakers to make strategic adjustments.
Expanding
Toyota is investing $531M to expand its San Antonio, Texas, facility, adding 400 to its workforce. The new 500k sq ft facility will focus on drivetrain parts production, enhancing the existing campus' capabilities.
Industry Directions
Revenue at the world's largest auto parts suppliers grew in 2023 as supply chain disruptions eased. However, suppliers are adapting to changes $ in production locations, product focus, and strategies amidst the transition to EVs, geopolitical uncertainties, and years of reduced profits.
Bosch, the largest supplier, reported $55.9B in sales, reflecting its strategic focus on the right product mix.
"When supply chains are tight, it's super important to have the right mix of products that you're building with the resources that are constrained," said Paul Thomas, head of Bosch's Americas mobility unit. "The last thing you want to do is build a lot of the wrong thing."
Increased lithium production has benefited companies like CATL, which is now a top-five supplier due to the rise in EV production. Due to geopolitical pressures, suppliers are also reconsidering sourcing locations, with a shift towards regions like Mexico, India, Thailand, and Vietnam. The EV transition is forcing suppliers to balance investment in EV parts while managing costs and maintaining competitiveness in a changing market.
Mergers, Ventures, Acquisitions
Volkswagen will invest up to $5B in Rivian, which is struggling with profitability and scaling production. The partnership aims to leverage VW's manufacturing expertise and Rivian's technology.
Initially, Volkswagen will invest $1B, potentially increasing to $5B, contingent on regulatory approval. "This is important for us financially," said RJ Scaringe, CEO of Rivian. The collaboration will help Rivian launch its R2 SUV and complete its Georgia factory. Rivian expects to sell 57k vehicles this year, far fewer than Volkswagen sells in a week. The partnership fills a gap in VW's recent software development challenges, aiming to enhance both companies' capabilities in the EV market.
UK-based Enso plans to invest $500M to build an EV tire factory in the US. Potential sites include Colorado, Nevada, Texas, and Georgia. The facility aims to produce 5M EV tires yearly by 2027 with a full-capacity workforce of up to 2.4k.
BYD continues to solidify its plans to establish an EV plant in Mexico, creating approximately 10k jobs, according to Jorge Vallejo, the general director of BYD México. The plant's location is still being finalized, with 23 Mexican states vying to host it, narrowed down to three finalists. The plant will focus on the Mexican market, with an annual production capacity of 150k vehicles.
EV battery startup Our Next Energy (ONE) has formed a strategic partnership $ with Foxconn to help stabilize its finances and scale up its operations. The partnership, which involves Foxconn taking an ownership stake but not acquiring ONE, aims to accelerate its development.
ONE has faced financial challenges, including a failed Series C fundraising round and production suspension. The collaboration with Foxconn, known for its manufacturing expertise, is expected to provide the necessary capital and support for ONE to continue its operations independently.
The partnership with Foxconn could help sustain ONE's ambitions to establish a US-based EV battery manufacturing presence amidst an industry dominated by Chinese firms.
Opening
Germany's ElringKlinger will open a new facility to manufacture battery cell contacting systems in Easley, Pickens County, South Carolina. The initial 226k sq ft factory will expand into its central battery hub for North America, starting production by mid-2025.
BMW Group has invested $200M to open a 215k sq ft press shop at Plant Spartanburg in South Carolina, adding 200 workers. This new facility can produce up to 10k parts per day and will support the production of various BMW models, including future EVs, starting in 2026.
Ferrari's new E-Building in Maranello, Italy, will house the company's production and development for ICE, hybrid, and EV vehicles. Located north of the Ferrari campus, the 457k sq ft facility is expected to employ over 300 workers, with operations set to start in mid-2025.
Production Increase
Volkswagen's battery subsidiary PowerCo is on track with the production of its unified cell, with the first block completed at its Salzgitter, Germany plant. Pre-series production will start this year, and series production is set for 2025. PowerCo's sites in Spain and Canada are also on schedule. White initially planned to produce 80% of its required cells, VW now plans only to manufacture 50% in-house. The unified cell, which is adaptable to different chemistries, will debut in the ID.2 model.
Volkswagen also plans to more than double the production of its ID.Buzz electric van as the three-row model launches in the US this year. After producing 35k units last year, VW aims to ramp up production to over 100k in the medium term at its Hanover, Germany, plant, where the ID.Buzz is built for the global market.
Raw Material Costs
Lithium prices have continued to fall, with spot prices of lithium carbonate in China hitting their lowest levels since August 2021. The decline follows a significant drop in 2023, driven by oversupply and slowing demand growth. Major producers like Albemarle have seen auction prices drop, and inventories have risen since April.
Despite some traders predicting a limited downside, the market's sentiment has impacted producers' stock prices, such as Albemarle, Lithium Americas, and Piedmont. The ongoing slump in lithium prices reflects challenges in the EV supply chain and highlights the market's volatility impacting producers.
Regulation
The European Union has revised its proposed tariffs on electric vehicles imported from China. Tariffs for MG's battery-electric cars have been slightly reduced $ to 37.6% from 38.1%, and for Geely, which owns Volvo and Polestar, to 19.9% from 20%.
Other cooperating Chinese EV producers will face a weighted average duty of 20.8%, while non-cooperating companies will face a 37.6% levy. BYD's tariffs remain at 17.4%.
The provisional tariffs are set for July 4, with definitive duties by November. Tesla may receive an individual duty rate. China has threatened retaliation, targeting EU agricultural goods and other industries.
Canada is preparing to impose tariffs on Chinese-made EVs to align with the US and EU, both of which have already introduced heavy duties to ensure fair competition from Chinese imports. This move follows pressure from Canadian officials and the public to protect local jobs and manufacturing investments.
