Automotive Supply Chain Risk Digest #415

January 10 - 16, 2025, by Elm Analytics

Jan 17, 2025

CHANGE IN MANAGEMENT

Hyundai and Genesis appoint new NA COOs
Webasto names Chief Restructuring Officer
Piston Group parts ways with CFO

EARNING DIP

German automakers face declining sales

EXPANDING

Freudenberg opens two plants in India

MERGERS, VENTURES, ACQUISITIONS

Chinese firms consider buying VW factories
Honda urges Renault-Nissan stake adjustment
Rivian receives $6.6B for Georgia EV plant

OPENING

Hi-Lex opens second plant in Mexico
Jatco to build drivetrain plant in UK

PRODUCTION DECREASE

Tesla cuts Cybertruck production staff

PRODUCTION INCREASE

China forecasts slower vehicle export growth

RAW MATERIALS

Battery prices expected to drop 3%

RELOCATING

Nitto opens facility in Kentucky, consolidates operations

REGULATION

Ban on China, Russia-linked vehicle tech

RISK ANALYTICS

VW union-management negotiations impact operations

Change In Management

Hyundai has appointed Claudia Marquez $ as COO of Hyundai Motor America, overseeing sales, distribution, product management, and aftersales while strengthening dealer relations.

Tedros Mengiste $ has been promoted to COO of Genesis Motor North America, tasked with guiding the brand's growth through hybrid drivetrain deployment and the expansion of standalone retail facilities.

Johann Stohner has been appointed Webasto's Chief Restructuring Officer to enhance the company's financial and operational restructuring efforts. This move reflects the company's strategic focus on overcoming challenges and improving efficiency in alignment with current market demands.

Piston Group has parted ways with its CFO, Hughey Newsome, after two years. He joined the company in December 2022. The reasons for his departure remain unclear, and the company has not disclosed plans for filling the role amid ongoing scrutiny following the Michigan Minority Supplier Development Council's revocation of its minority certification.

Earning Dip

In 2024, German luxury car manufacturers experienced notable declines in sales.

Here's a quick overview:

BMW: Sales dropped by 2.3%.
Mercedes-Benz: Sales fell by 3%
Porsche: Also saw a 3% decrease
Audi: Suffered the most significant decline at 12%.

In China, the situation was even worse for some brands:

BMW: Sales decreased by 13.4%.
Audi: Experienced an 11% drop.
Mercedes-Benz: Sales fell by 7%.

Audi was particularly hard hit in Germany, with sales down 21%. This downturn is primarily due to competition from Chinese EV brands that offer aggressive pricing and benefit from government subsidies.

Overall, the German car market is struggling. Sales in 2024 were 25% lower than in 2019. Interestingly, while BMW's global electric vehicle sales grew by 13.5%, Mercedes-Benz saw a significant 23% drop in battery-electric vehicle sales. However, Mercedes-Benz did see some recovery in the US luxury model market in the fourth quarter of the year.

Expanding

Freudenberg Group has inaugurated two new manufacturing plants in Morinda, Punjab, India, covering an area of approximately 438k sq ft. The facilities consolidate operations previously spread across Basma and Mohali to improve production efficiency. Operated by Freudenberg-NOK India and Vibracoustic India, the plants will manufacture components, including dynamic air springs for internal combustion engines, hybrids, and EVs.

Mergers, Ventures, Acquisitions

Chinese automakers are reportedly considering buying German factories, especially Volkswagen sites in Dresden and Osnabrueck, which are set to close. These facilities could help Chinese EV makers enter the European market and avoid import tariffs.

Volkswagen is open to selling the Osnabrueck plant, which has 2.3k employees, as it deals with declining sales. However, this decision is politically sensitive, with Germany wanting to lessen its dependence on China while Chinese investors see value in Germany's car industry. Selling the plants might be cheaper for VW than shutting them down entirely. Such acquisitions could increase trade tensions and competition in Europe's EV sector.

Honda is reportedly urging Nissan to acquire Renault's 35.7% stake in the company ahead of their planned merger in mid-2026. This merger agreement, expected to be finalized by June 2025, would create the world's third-largest automaker by sales. Honda is concerned that Renault may sell its stake to a third party during negotiation.

So far, Renault has already reduced Nissan's ownership from 43.4% to 35.7%. Mitsubishi, part of the current Renault-Nissan-Mitsubishi Alliance, will determine whether to join the Honda-Nissan merger by January 2025.

Honda, Nissan, and Mitsubishi sold over 8.2M vehicles in 2023, potentially splitting Japan's automotive market between this new alliance and Toyota-led brands. This merger could reshape the global automotive landscape, challenging existing alliances and prompting significant changes in Japan's auto industry dynamics.

Rivian is set to receive about $6.6B from the US Department of Energy to build a new electric vehicle manufacturing plant in Georgia. The 1.7k acres location will produce Rivian's R2 midsize SUV and R3 crossover, starting production in 2027 and reaching full capacity by 2028. Although the Biden administration announced this loan in November 2024, the upcoming Trump administration may challenge the program and shift focus back to fossil fuels.

Opening

Hi-Lex Controls has opened its second manufacturing plant in Derramadero, Coahuila, Mexico, expanding its production of window regulators, door modules, and mechanical control cables.

Jatco will build a 138.8k sq ft plant in the UK to produce electric drivetrains for Nissan's Sunderland-built all-electric models, including the Leaf, Juke, and Qashqai. Once operational in 2026, the $66M plant aims to manufacture up to 340k electric powertrains annually, further supporting Nissan's EV36Zero project.

Production Decrease

Due to declining demand, Tesla has reduced the Cybertruck production staff at its Austin factory. Workers were reallocated to Model Y assembly because there were not enough volunteers to switch roles.

Production Increase

According to the China Association of Automobile Manufacturers, China's vehicle exports are expected to grow by 5.8% in 2025, a significant slowdown from the 19.3% growth seen in 2024.

In contrast, domestic vehicle sales are forecasted to increase by 4.7%, thanks to extended government policy incentives. Last year, China's exports of EVs fell by 10.4%. However, exports of plug-in hybrids soared by 190%.

This shift is primarily due to new EU tariffs on China-made EVs, prompting automakers to focus more on hybrid vehicles to navigate these trade challenges. The growth rate for NEVs is also expected to slow down, from 35.5% in 2024 to 24.4% in 2025.

Raw Materials

Analysts at BloombergNEF predict lithium-ion battery prices will decrease by 3% in 2025, dropping to about $112 per kilowatt-hour. This is a much smaller reduction than the 20% decrease in 2024 and the 13% drop in 2023. The slower price decline is due to increasing trade tensions and rising metals costs.

Regulation

The US Department of Commerce's Bureau of Industry and Security has issued a Final Rule banning the import and sale of connected vehicles and components tied to China and Russia, citing national security concerns.

Compliance hinges on supply chain transparency, which requires detailed mapping of the origins of Vehicle Connectivity Systems hardware and Automated Driving Systems software to identify and eliminate components linked to the PRC or Russia.

However, OEMs provide limited guidance on implementing these requirements, leaving suppliers to establish processes independently. While formal certification is not mandated, OEMs may require compliance declarations in the future.

The rule significantly impacts the automotive supply chain, demanding extensive supply chain mapping to ensure compliance despite limited OEM guidance, address geopolitical risks, and safeguard market access.

Relocating

Japanese adhesive manufacturer Nitto will open a new advanced materials facility in Frankfort, Kentucky, in spring 2025. This will create 220 manufacturing jobs. It will be Nitto's second facility in Kentucky, joining an existing plant in Lexington.

Simultaneously, Nitto is closing facilities in Chesapeake, Virginia; Piqua, Ohio; and Jasper, Alabama, resulting in over 280 layoffs. This indicates a broader restructuring and resource consolidation strategy.