Automotive Supply Chain Risk Digest #427
April 4 - 10, 2025, by Elm Analytics
Contents
BANKRUPTCY
Canadian demand rises for trade insurance
CHANGE IN MANAGEMENT
Honda exec resigns after misconduct claims
Tesla leadership departures continue
DISASTER
Stellantis worker dies during plant retool
EARNING DIP
JAC Motors hit by major losses
HUMAN CAPITAL
GM to lay off 200 workers
INDUSTRY DIRECTIONS
China’s factory investment drives export boom
Suppliers demand prepay to cover tariffs
Stellantis offers support for tariff-hit suppliers
LITIGATION
FCA violations rise from Customs scrutiny
MERGERS, VENTURES, ACQUISITIONS
Continental spins off ContiTech division
CATL seeks control of Nio Power
Infineon buys Marvell's auto Ethernet unit
PRODUCTION DECREASE
Telemetry forecasts 7M long-term sales drop
Goldman cuts global auto production outlook
PRODUCTION INCREASE
BMW may boost Spartanburg plant output
REGULATION
Most auto tariffs remain despite abrupt pause
Tariffs leave suppliers struggling with cash flow
Canada retaliates with 25% auto tariffs
UK eases EV compliance amid tariffs
RISK ANALYTICS
CAR analyzes automaker tariff vulnerabilities
Detroit-3 automakers face higher tariff exposure
US tariffs impact Chinese automakers less
SHUTDOWN
Stellantis stops T03 EV production in Poland
Bankruptcy
Widely used in Europe, interest in trade credit insurance for insolvencies of foreign customers is growing in Canada.
Change In Management
Shinji Aoyama, Honda's Executive Vice President, has resigned due to allegations of inappropriate conduct at a social event. Honda's President, Toshihiro Mibe, will return 20% of his salary for two months, highlighting the importance of the incident during a strategic transition.
Two high-profile Tesla departures this week:
David Lau, Tesla's VP of Software Engineering, is leaving amid ongoing turmoil. His exit heightens overall operational risk as the company faces declining sales and challenges maintaining continuity within its core technology leadership.
Tesla's Director of Accounting Controllership, Harsh Rungta, has left the company to become Chief Accounting Officer at Archer Aviation, just two weeks before Tesla's Q1 2025 financial results, raising concerns about continuity in financial oversight and reporting.
Disaster
A 62-year-old Stellantis worker tragically died in an incident at the idled Dundee Engine Plant in Michigan, which is currently undergoing retooling.
Earning Dip
JAC Motors faced a staggering 1,277.59% year-over-year decline, reporting a net loss of $234M in 2024. This significant drop is linked to investment losses in its Volkswagen Anhui joint venture and asset impairments.
Despite these setbacks, JAC is investing in its Maextro brand (Huawei partnership), hoping for recovery in the luxury EV sector.
Human Capital
General Motors will temporarily lay off 200 employees at its Factory Zero EV plant in Detroit, Michigan, starting April 14, citing market conditions rather than tariffs as the cause.
The site, which produces key EV models like the Chevrolet Silverado EV and Cadillac Escalade IQ, remains central to GM's all-electric strategy and employs over 4.5k workers overall.
Industry Directions
China is rapidly expanding its manufacturing and export capabilities, fueled by $1.9T in redirected industrial lending and a shift from real estate to factory investment.
Major EV makers like BYD and Zeekr are increasing production through automation, supported by state R&D and infrastructure investment.
Exports rose 17.3% last year, with Chinese automakers gaining market share in Southeast Asia, Latin America, and Europe.
The US has imposed steep tariffs on Chinese autos in response, while the EU has introduced duties on subsidized EVs.
Former US Trade Representative Katherine Tai warned that China's aggressive export strategy could disrupt global markets, risking price compression and trade friction, particularly for automotive suppliers in the EV sector.
French automotive suppliers Novares and Valeo are requiring customers to pay the full cost of US import tariffs upfront due to the new 25% duties on foreign car parts.
Novares has adopted a strict "prepay or no customs clearance" policy, while Valeo has secured agreements from over half of its customers to cover the added costs.
Despite some exemptions under USMCA, more parts may face tariffs starting May 3.
Stellantis is now offering to assist suppliers with their tariff costs $, contingent on the suppliers developing strategies to reduce their financial exposure.
The move represents a notable shift in Stellantis' previously strained relationship with parts makers, as the company aims to maintain production and prevent disruptions from potential supplier bankruptcies.
While suppliers typically bear tariff costs, many struggle to absorb these expenses, highlighting the urgent need for collaboration between automakers and their suppliers. (video)
Litigation
Multinational importers face heightened risks from Customs enforcement and False Claims Act (FCA) actions due to high tariffs and increased scrutiny under the Trump administration.
Customs now uses advanced data analytics through the ACE portal to identify discrepancies in country-of-origin declarations and tariff classifications, raising the potential for FCA claims—a notable March 2025 settlement of $8.1 million involved misdeclaring Chinese wood flooring as Malaysian.
Whistleblowers, including competitors, can receive significant rewards under qui tam suits.
"Errors in Customs compliance can lead to quickly mounting underpayments of tariffs," states Foley & Lardner LLP, highlighting the need for urgent self-disclosures and internal controls.
Given the FCA's broad reach, even minor mistakes can lead to substantial penalties, particularly for automotive suppliers relying on accurate tariff compliance.
Mergers, Ventures, Acquisitions
Continental AG will spin off its ContiTech rubber and plastics division to focus solely on tire manufacturing, likely through a sale, to enhance agility in volatile markets.
This restructuring comes amid broader challenges for German suppliers, including declining car production and rising costs, raising concerns about supply chain continuity.
CATL is looking to acquire a controlling stake in Nio Power after its $342M investment in March. This move aims to enhance its influence over Nio's battery swap operations, indicating a strategic consolidation within the EV battery ecosystem.
Infineon plans to acquire Marvell's Automotive Ethernet unit for $2.5B, boosting its automotive networking capabilities and expanding its customer base in the growing market for software-defined vehicles.
Production Decrease
Telemetry, a Detroit-based advisory firm, predicts a decline of 1.8M auto sales in the US and Canada in 2025 due to Trump's 25% tariffs, with long-term losses potentially reaching 7M units by 2035 if trade tensions continue.
They note that production shifts, like GM increasing truck output in Indiana and Stellantis pausing operations in Mexico and Canada, won't offset the drop in consumer demand resulting from rising vehicle prices and strained affordability.
This outlook is echoed by Goldman Sachs, which has reduced its 2025 US auto sales forecast from 16.25M→15.4M units, anticipating average vehicle prices will rise by $2k–$4k due to tariff costs.
The bank also cut its global auto production estimate by 1.7M units through 2026, citing cost pressures and a weakening market, indicating a prolonged downturn in the automotive supply chain.
Production Increase
BMW is evaluating the addition of shifts at its Spartanburg, South Carolina plant to increase output by up to 80k units, aiming to offset trade tension impacts and stabilize US supply. Executives confirmed that vehicles produced for export remain tariff-exempt due to the plant's free-trade zone status, offering some operational relief.
Regulation
Despite President Trump's abrupt 90-day pause on reciprocal tariffs, last week's auto-related tariffs remain largely in place $, including the 25% duty on imported vehicles and existing tariffs on steel, aluminum, and parts.
The White House confirmed that even USMCA-compliant vehicles from Canada and Mexico must still pay the 25% tariff on non-US content.
Suppliers are increasingly overwhelmed by the compounding nature of Trump's tariffs, which apply sequentially to steel and aluminum (since March 12) and imported vehicles (since April 3) and will soon expand to a broad range of parts by May 3.
"There are so many tariffs that suppliers are left sort of guessing what the total tariff will be," said Michael Robinet of S&P Global Mobility.
While most countries face a 10% base tariff, rates spike significantly for specific regions—up to 125% for goods from China and 25% for non-compliant imports from Canada and Mexico under North American trade rules.
The impact of these tariffs is evident in the near-impossible preparation timelines and complex Customs documentation requirements.
"We're used to having 270 days to prepare, not three hours," one executive said, highlighting the urgency and pressure faced by the suppliers.
Stephanie Brinley, associate director of AutoIntelligence at S&P Global Mobility, noted, "When you're assessed a tariff on bringing a good in, it's zero to five to seven days to pay the government for the tariff."
This becomes particularly challenging for suppliers who aren't paid for the goods for 60 to 90 days, creating a significant cash flow crunch during this frantic tariff landscape.
Canada has imposed retaliatory 25% tariffs on US-made fully assembled vehicles that are non-CUSMA compliant or contain non-Canadian/non-Mexican content; auto parts are not included in the measures.
The UK government has adjusted its EV transition policy, easing annual sales targets and reducing penalties for manufacturers due to rising trade pressures from new US tariffs.
While the 2030 ban on new petrol and diesel cars remains, automakers now have more flexibility in meeting sales targets, with fines lowered from £15k → £12k per vehicle.
Smaller manufacturers like Aston Martin and McLaren are exempt from the 2030 ban, and hybrid vehicle sales will continue until 2035.
These changes aim to cushion domestic OEMs and suppliers from trade shocks while maintaining long-term EV goals, highlighting a more flexible compliance path under escalating global protectionism.
Risk Analytics
Center for Automotive Research:
Jato Dynamics:
CNEVPost:
Shutdown
Stellantis has halted production of the Leapmotor T03 EV at its Tychy, Poland plant as of March 30 and is seeking new European manufacturing options.
This decision comes after canceling plans for a second Leapmotor model due to China's directive on investments in EU countries with tariffs on Chinese EVs. Spain is now the preferred location for future production.
