Automotive Supply Chain Risk Digest #387
June 28 - July 4, 2024, by Elm Analytics
Contents
US car market declined 0.5% in Q2
VW's Zwickau plant may cut jobs
Mexican auto industry faces challenges
MERGERS, VENTURES, ACQUISITIONS
Stellantis partners with France's CEA
Nissan and Honda consider partnership
Toyota seeks Lexus factory in Shanghai
BYD opens plant in Thailand
Hyundai, LG open battery plant in Indonesia
Ningbo Zhenyu investing $53.7M in Serbia
Shape Corp opens Alabama factory
Stellantis reduces shift at Warren plant
NIO sets delivery records in June
EU imposes up to 37.6% tariffs on Chinese EVs
GlobalData: EU tariffs impact on Chinese car makers
GM to pay $145.8M penalty for excess emissions
Constellium suspends production due to flooding
Earning Dip
The US new-car market declined 0.5% $ in the second quarter of 2024 due to affordability issues, high prices, and increased borrowing costs.
A ransomware event at CDK Global on June 19 exacerbated the downturn, disrupting sales processes. The seasonally adjusted annual sales rate for June was 15.3M, a decline from May's 16.08M and June 2023's 16.22M.
Jonathan Smoke, Chief Economist at Cox Automotive, cited a slowing fleet market and a cautious retail market as additional factors.
US Q2-2024 Performance - (volume) → Y/Y% change:
Volvo (149k) → 12.7%
VW (150k) → 12.2%
Toyota (621k) → 9.2%
Mazda (102k) → 7.3%
Subaru (159k) → 5.4%
Rivian (13k) → 4.5%
Honda (356k) → 2.7%
BMW (97k) → 1.6%
Ford (532k) → 0.9%
General Motors (691k) → 0.3%
Hyundai-Kia (438k) → 0.2%
Nissan (236k) → -3.1%
Nissan/Mitsubishi (259k) → -3.5%
Mitsubishi (22k) → -7.6%
Tesla (149k) → -13.8%
Stellantis (346k) → -20.5%
Polestar (2.3k) → -34.3%
Human Capital
Volkswagen's electric car plant in Zwickau may see over 1k temporary employment contracts expire by the end of 2025, with a final decision expected in August. This potential reduction follows previous non-renewals of several hundred fixed-term contracts in 2023 and 2024.
The anticipated job cuts are attributed to sluggish demand for VW's electric vehicles. Consequently, after the summer holidays, the plant will move to two schedules without night shifts. Currently, the Zwickau plant employs around 9.4k people, up from 6.5k-7.5k before it became a dedicated EV facility.
The potential job cuts reflect VW's challenges in maintaining production levels amid fluctuating demand for electric vehicles, impacting workforce stability at a significant production site.
Industry Directions
As Mexico's auto industry expands, companies face increasing challenges $, including high inflation, labor turnover, wage increases, and safety concerns. The strengthening peso has also raised export costs.
Despite these issues, Mexico's importance in the North American supply chain grows as manufacturers shift from China.
Rising labor costs and turnover impact suppliers like Forvia and Lear, and Forvia has reported losses due to crime and corruption.
Increasing operational costs and safety issues in Mexico could impact the automotive supply chain, potentially increasing costs and affecting production timelines for automakers relying on Mexican manufacturing. Still, Mexico remains a crucial location for production due to its strategic importance to customers.
Mergers, Ventures, Acquisitions
Stellantis has partnered with France's CEA research organization to develop next-generation battery cells for electric vehicles. It aims to accelerate advancements in battery technology to reduce EV costs amid slower-than-expected demand growth.
Nissan Motor and Honda Motor are reportedly considering a strategic partnership to standardize automotive software and collaborate on EV charging infrastructure. The potential collaboration aims to boost competitiveness and reduce costs by addressing both companies' challenges in the EV market and improving their global infrastructure.
Toyota is reportedly discussing establishing a wholly-owned Lexus factory with Shanghai authorities, similar to Tesla's deal $, which includes tax breaks, policy support, and land grants.
This move, requiring central government approval, aligns with CEO Koji Sato's "battery electric vehicle first" approach for the premium Lexus brand.
Despite intense local competition and declining sales in China, Toyota aims to bolster its presence with this new factory, producing EVs to meet its ambitious targets of 1.5M EVs annually by 2026 and 3.5M by 2030.
Opening
BYD inaugurated its new plant in Thailand, which has an annual capacity of 150k vehicles and is BYD's first wholly-owned overseas passenger car factory.
Hyundai and LG Energy Solution have launched their first EV battery cell plant in Indonesia, a JV investing $1.1B. The plant, with a capacity of 10GWh annually, will supply cells for over 150k Hyundai and Kia EVs, starting with the new Kona Electric. This facility, named "HLI Green Power," aims to secure affordable EV batteries and support Indonesia's goal of producing 600k EVs annually by 2026.
Ningbo Zhenyu Technology plans to invest $53.7M in a new car parts factory in Apatin, Serbia. Construction and operations will begin in 2024 and will be completed in 2028. The facility will produce components such as rotors and stators and initially employ 150 workers.
Michigan's Shape Corp opened a new 202k sq ft factory in Tanner, Alabama, to manufacture lightweight aluminum and steel crash management and structural components for automobiles. The facility will also provide aluminum and steel welding and roll-forming capabilities.
Production Decrease
Stellantis has announced a reduction in the shift at its Warren, Michigan Truck Assembly Plant in July, affecting approximately 1.6k workers. This decision is part of the company's strategic efforts to align production with the current decrease in sales.
In addition, the automaker will be implementing production changes at its Toledo, Ohio, plants. Operations at the Toledo South plant will be paused from July 8 to August 19 for retooling and summer vacation, with employees being reassigned to the Toledo North plant during this period.
These changes are being made in response to a 21% decline in US sales for Q2-2024.
Production Increase
In June 2024, NIO delivered 21k electric vehicles, doubling its deliveries from the previous year. It set new monthly and quarterly records driven by new models and pricing adjustments.
Regulation
The EU will impose up to 37.6% tariffs on Chinese EV imports, marking its most significant trade case against Beijing. The provisional tariffs, lasting four months, aim to counteract the threat of cheap EVs built with state subsidies flooding the market.
Talks between the EU and China are ongoing, with the potential for retaliation from China. These tariffs could drive up EV costs in Europe, potentially hampering the EU's carbon neutrality goals. Some Chinese automakers may raise prices or consider setting up European manufacturing to bypass the tariffs.
General Motors will pay a $145.8M penalty and forfeit carbon and fuel economy credits worth hundreds of millions following a US government investigation that found excess emissions in approximately 5.9M vehicles from 2012-2018.
The EPA determined that these vehicles emitted over 10% more carbon dioxide than GM had reported.
GM has agreed to give up about 50M metric tons in carbon allowances and cancel over 30.6M fuel economy credits from the 2008-2010 model years. Environmental advocates criticized GM for the compliance issues, while analysts believe the impact on GM's reputation will be minor.
Shutdown
Constellium SE reported severe flooding from the Rhone River, which suspended its extrusion and plate production in Sierre and billet casting in Chippis, Switzerland.
