AD #4140 – VW Starts Passing Tariff Costs to Consumers; Tier 1s Need Junk Bonds to Raise Capital; XPeng Says L4 Is Easier Than L2

This is Autoline Daily, the show dedicated to enthusiasts of the global automotive industry.

VW STARTS PASSING TARIFF COSTS TO CONSUMERS
Yesterday we reported that automakers in the U.S. haven’t really raised prices that much due to U.S. tariffs, and then today we find out that Volkswagen is raising prices anywhere from 2.9% to 6.5%. The Jetta and Taos, which are made in Mexico, went up $1,000. The Golf GTI goes up by more than two grand, while the Golf R goes up over $2,400. Even the Atlas crossover is going up by more than $1,100 despite being built in the U.S. because it gets its engine and other content from Mexico. VW’s sales in the U.S. are down by double digits so far this year, but there may be some help on the way for consumers. With the Federal Reserve cutting interest rates by a quarter of a percentage point, interest rates on car loans should ease up a bit.

EU GETS ITS FIRST RARE EARTH MAGNET FACTORY
China currently dominates global production of rare-earth magnets, accounting for 70% of output last year. And when it restricts exports, like it did earlier this year in retaliation to President Trump’s tariffs, it can really impact operations. And several automakers had to idle production because of low supplies. But now new sources are becoming available. Canadian company Neo Performance Materials opened Europe’s first rare-earth magnet plant in Estonia earlier today. The site will manufacture neodymium magnets and will initially produce 2,000 tons of magnets per year with deliveries expected to start next year. The plant’s capacity will triple in 2027, which will be enough to support 1 million EVs a year. Neo has signed “multiple” five-to-seven-year contracts in the $50 to $100 million range, but the only company we know for sure is the supplier Bosch which has reserved a “significant” share of the plant’s production. However, representatives from General Motors, Schaeffler and Mahle also attended the opening ceremony of the plant, so it’s probably safe to assume they’re also customers.

HONDA OPENS NEW RECYCLING CENTER IN OHIO
Recycling materials in the auto industry is nothing new but Honda is taking it a step further. The company opened its new Resource Circularity Center in Ohio, which will recycle tools, equipment and other items used in operations, including vehicle production. It will also recycle office electronics and vehicle service parts. In addition to recycling, Honda will study ways it can repurpose equipment and parts, including donating items to non-profits. Honda says the center will help reduce reliance on new raw materials while reducing waste that would otherwise end up in the landfill. Another benefit we’d also point out is that Honda doesn’t have to write the recycled materials off its books, which will help its financials.

U.S. SENATE APPROVES NEW NHTSA DIRECTOR
For the first time in three years, the National Highway Traffic Safety Administration or NHTSA has a permanent leader. The U.S. Senate voted in favor of appointing Jonathan Morrison to head up the division. Morrison was previously a lawyer at Apple and even worked as the Chief Counsel for NHTSA during President Trump’s 1st term. 

TIER 1s NEED JUNK BONDS TO RAISE CAPITAL
Several Tier 1 suppliers are turning to selling junk bonds to raise the capital they need. American Axle, ZF, and Forvia are issuing bonds with high interest rates and to us, it really says something because it means an American, a German and a French supplier have to turn to junk bonds to fund their capital needs. That suggests they couldn’t raise the money selling stock, or didn’t have the credit ratings to sell standard investment-grade bonds, or simply couldn’t borrow the money from banks. And that in a nutshell describes the pressure suppliers are under. Just so you know, the yields on these bonds are pretty good. ZF’s have a 7.6% yield. Forvia’s is 6.75% while American Axle’s is 6.5%. 

NVIDIA INVESTS IN AV COMPANY FROM UK
We’re unofficially, officially calling 2025 the year of autonomy because we’re seeing so much activity in the segment and feel like we’re at an inflection point. And here’s an example of a fairly new startup that’s getting some very healthy funding. Wayve, which was founded in 2017, raised $1 billion last year, plus a private investment from Uber and now NVIDIA has signed a letter of intent to pour half a billion dollars into the company. What makes Wayve’s tech a little unique is that it uses cameras, sensors and machine learning to teach its system, rather than relying on digital maps and coding. And not surprisingly, it uses chips from NVIDIA. Nissan also formed a partnership with Wayve and will use its tech for the next-gen, lidar-based version of its hands-free driving system, which is scheduled to come out in 2027.

WAYMO GETS INTO PUBLIC TRANSPORTATION IN ARIZONA
And in other autonomous news, public transportation riders in a city of Arizona will now have access to Waymo vehicles. Waymo signed a partnership with Via Transportation, a tech company that uses software to help optimize public transportation networks. So, now anyone that uses Via’s software can integrate Waymo into their available fleet and the city of Chandler, Arizona is the first to try it out. While Via has services in hundreds of cities in 30 countries, any expansion would be limited where Waymo operates, which currently sits at 5 cities. 

XPENG SAYS L4 IS EASIER THAN L2 
We’ve always heard that Level 4 autonomous cars are really hard to do. But the head of autonomous driving for XPeng, says that doing Level 4 cars is actually easier than Level 2 because of the human driver. She says that in many Level 2 situations, drivers want to take control of the car, and that intervention drives up complexity. Interestingly, XPeng is taking a similar approach to Tesla, eliminating lidar from its AV stack and relying mostly on cameras. XPeng’s AV head says it’s training its AI system with videos that are only 10 to 30 seconds long, and she says that its AI system can’t use data from lidar. She also notes that their AV stack does not rely on HD maps.

But that wraps up today’s report, thanks for watching and have a great weekend.