Automotive Supply Chain Risk Digest #413
December 27, 2024 - January 2, 2025, by Elm Analytics
Contents
BANKRUPTCY
Bankruptcy filings rose amid financial strain
Jervois Global files for cobalt bankruptcy
CYBER SECURITY
Volkswagen data breach exposed 800k customers
HUMAN CAPITAL
Xpeng plans to hire 6k workers
LABOR DISPUTE
ILA and USMX to resume contract talks
LITIGATION
Court rulings reshape requirements contracts
OPENING
SAIC opens MG Motor plant in Egypt
PRODUCTION DECREASE
Tesla deliveries fell short of guidance
PRODUCTION INCREASE
Xiaomi doubles EV production plans
Lucid begins Gravity crossover deliveries
WYP Glass launches automotive glass project
RAW MATERIALS
China proposes new export restrictions
Bankruptcy
In 2024, bankruptcy filings rose by 33.5%, with the trend expected to continue in 2025 due to rising interest rates, inflation, and ongoing financial distress in the automotive industry.
Notable auto sector bankruptcies included Northvolt and Fisker, as many electric vehicle companies struggled to remain profitable amid dropping demand.
Auto parts suppliers, such as Accuride, have been struggling financially. Many of them have not entirely managed to bounce back from the supply chain problems caused by COVID-19.
Additionally, manufacturers are now requiring higher inventory levels, which increases the risk for smaller companies in the supply chain.
Trump's proposed tariffs are a cause for concern, as they could exacerbate these issues, potentially costing auto parts suppliers up to 17% of their annual core profits.
Jervois Global, a cobalt miner the US deems critical to EV batteries and defense applications, has filed for pre-packaged bankruptcy as it struggles with falling cobalt prices and intense competition from China.
As part of the restructuring, US fund manager Millstreet Capital Management will take the company private, injecting $145M. Jervois idled its Salmon, Idaho cobalt mine in 2023, the only US cobalt source, citing unsustainable prices.
Cyber Security
Volkswagen suffered a data breach exposing the sensitive information of 800k EV owners from its Volkswagen, Audi, Seat, and Skoda brands.
The breach, caused by a misconfigured Amazon cloud storage system managed by subsidiary Cariad, left personal data, including location information, email addresses, and home addresses, accessible online for months.
An anonymous hacker discovered the issue and reported it to the ethical hacking group Chaos Computer Club, which alerted Volkswagen.
The breach impacted vehicles primarily in Germany and other European countries, including Norway, Sweden, and the UK. Cariad resolved the issue on the same day it was informed.
Human Capital
Chinese EV maker Xpeng plans to hire over 6k workers in 2025 as part of its growth strategy. CEO He Xiaopeng reportedly anticipates more intense competition in the electric vehicle market, with a price war expected to begin in January.
Labor
The International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) will resume contract negotiations on January 7, just days before the current extension expires on January 15.
The talks follow a period of informal discussions after formal negotiations broke down in November over disputes about automated container handling technology.
The ILA opposes automation, citing job security concerns, while employers argue it is necessary to improve port efficiency.
The resumption comes amid industry fears of another strike similar to October’s three-day shutdown, which disrupted East and Gulf Coast ports.
Potential port strikes pose significant risks to the automotive supply chain, delaying vehicle and parts shipments critical to production timelines.
Litigation
Recent court decisions, including Michigan’s Airboss case, have disrupted the interpretation of requirements contracts, a cornerstone of automotive supply chains.
The rulings emphasize that terms like “blanket order” lack sufficient specificity unless they commit to a “set share” of buyer needs.
This decision creates opportunities for suppliers to challenge unfavorable agreements and negotiate better pricing but adds uncertainty for buyers relying on longstanding practices.
Jurisdictional differences over exclusivity and enforceability further complicate the landscape, requiring careful contract review and precise language.
Opening
SAIC’s MG Motor has partnered with Egypt’s Mansour Group to establish a new manufacturing plant in Egypt. The plant will initially produce the new-generation MG5 model.
The plant will have an annual capacity of 50,000 vehicles, with plans to double this capacity to 100,000 units in a future phase. SAIC aims to source over 45% of its components from local Egyptian suppliers. The facility will feature an 86k sq ft body shop, a 129k sq ft paint shop, and a 107 sq ft final assembly shop.
Production Decrease
Tesla reported delivering 495k EVs in Q4 2024, falling short of its 515k unit guidance and analysts’ expectations of 507k. Total 2024 deliveries reached 1.78M, a 1% decrease from 2023.
This marks a dramatic slowdown from Tesla’s 38% growth between 2022 and 2023, despite record quarterly deliveries and aggressive discounts, incentives, and new model launches like the Cybertruck.
Tesla’s delivery shortfall amidst increased competition and aggressive incentives signals challenges in sustaining growth, raising concerns about market dynamics and production scalability in the EV industry.
Production Increase
Xiaomi Automotive delivered 135k units of its flagship SU7 EV in 2024, surpassing its original target of 60k.
The SU7’s rapid market success followed its launch in late March 2024 and record-breaking demand, with 50k orders in 27 minutes.
Xiaomi plans to more than double production in 2025, aiming for 300k units with the addition of its new YU7 SUV model and the expansion of its Beijing facility, set for completion by mid-2025.
Lucid has begun delivering its Gravity crossover EV, starting with early units for employees, friends, family, and sales studios as test-drive vehicles. Its CEO, Peter Rawlinson, emphasized a structured ramp-up to ensure high quality. The company aims to leverage the growing interest in luxury three-row EVs to improve profitability.
The Gravity’s launch is part of Lucid’s strategy to recover market share from a challenging 2024 marked by low Air sedan sales and to address challenges from slow production scaling.
Anhui Wuyao Automotive Glass Co (WYP Glass) has launched its automotive glass project in Bengbu, Anhui, China, with an initial annual production capacity of 1M sets.
The 1.6M sq ft plant will primarily produce windshields and side windows. The company supplies BYD, Chery, Dongfeng Honda, Dongfeng Nissan, Great Wall Motor, and Geely.
Raw Materials
China’s commerce ministry has proposed new export restrictions on technologies that produce battery components and process critical minerals such as lithium and gallium.
The measures aim to bolster China’s dominance in these sectors. China processes 70% of the world’s lithium for EV batteries.
Analysts warn these restrictions could challenge Western lithium producers and disrupt plans for international expansion by Chinese battery giants like CATL, Gotion, and EVE Energy.
The proposed rules, open for public comment until February 1, come as geopolitical tensions with the US are expected to escalate under Donald Trump’s second term.
