AD #4316 – Trump Kills Canada & Mexico Trade Deal; EV Sales Recovering Faster Than Expected?; China Has a Capacity Problem

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

TRUMP KILLS USMCA
Well, this is something that the North American auto industry did not want to hear at all. President Trump says he’s not going to renew the USMCA free trade agreement with Canada and Mexico. Instead, the Administration wants a separate trade deal with each country, which we already knew. But here’s where it gets to be a jumbled mess. Trump wants yearly reviews which means negotiations will go on for years. And that’s exactly what automakers and suppliers don’t want to see. Just this week Swami Kotagiri, the CEO of Magna, said they want stability and visibility. And do you know what happens when automakers and suppliers don’t have stability and visibility? They don’t invest. They sit on their hands and wait until they think it’s safe for capital investment.

CHINA HAS A CAPACITY PROBLEM
Experts and executives in China have been warning that their auto industry is about to go through a massive restructuring. China may have as much as 28 million units of excess capacity, with most plants running below 50% utilization, which is the key reason why most automakers there are losing money. It’s also a reason why the price war is still going strong. On top of that there are currently 71 automotive groups, but that’s expected to drop 15 by the end of the decade, according to planners at the city of Changchun. It’s home to FAW, which is one of the oldest automakers in the country, and whose sales have been flat or declining for a decade. FAW makes its own cars, but also makes cars for VW, Audi and Toyota. The city is trying to lure other automakers to the area, like Leapmotor, BYD and Xiaomi, and we’re probably going to see this happen throughout China. Everyone knows the industry has to eliminate excess capacity, but no one wants to be on the losing end.

STELLANTIS STARTS ROAD TESTING SOLID-STATE BATTERIES
Stellantis is now testing solid-state batteries on the road in the U.S., integrating batteries from Factorial into a Dodge Charger Daytona. The automaker even patented a mechanical architecture to accommodate the solid-state cells inside the battery pack. Last year, the two companies demonstrated that the solid-state batteries had an energy density of 375 Wh/kg, can charge from 15% to 90% in 18 minutes and are reliable between -30C to 45C, or -22F to 113F. Stellantis and Factorial are now road testing the batteries to validate their safety, performance and reliability in real-world conditions.

NOVELIS RESTARTS NEW YORK ALUMINUM PRODUCTION
Good news for Ford. Aluminum supplier Novelis has restarted production at its plant in New York, which was shut down late last year by two fires. The supply shortages hurt production of the F-150, which have aluminum bodies, and led to Ford cutting its profit forecast and taking a charge of up to $2 billion. In addition to Ford, Novelis also supplies aluminum to Stellantis and General Motors.

EV SALES RECOVERING FASTER THAN EXPECTED?
U.S. EV sales might return to where they were before the federal tax credit went away faster than expected. Estimates for May are right around 85,000 units, which according to Kelley Blue Book would be the highest level since the incentive was taken away. Price likely played a role with average transaction prices for EVs falling for the 11th straight month. They came in just over $54,500, a drop of 4%, which also outpaced the very minor decrease in overall transaction prices, which came in at $49,200. So, with a price gap that is narrowing, higher fuel prices and more choice for consumers, not even including more affordable models coming like the new Ford truck and the Slate pickup, we can start to understand why sales of EVs are growing again. Monthly EV sales used to hover around 100,000 – 110,000 units and then peaked at nearly 148,000 in September of last year, right before the federal tax credit was yanked.

           

RENAULT WANTS ALL MODELS DEVELOPED AT CHINA SPEED
Renault wants to develop all of the models it sells in Europe at “China Speed.” CEO Francois Provost says the automaker isn’t focusing on scale like it did in the past. Instead he wants to focus on speed and agility. The automaker already developed the new Twingo mini-EV in under two years, so now Provost says he wants to develop all of its future vehicles in that timeframe. Renault also wants to build vehicles for other automakers. It currently has a deal with Ford to build two models and it’s collaborating with Geely in South America and South Korea. Renault says it’s aiming to build 300,000 vehicles a year for other automakers by 2030.

BENTLEY OPENS ALL-NEW PAINT SHOP
The paint shop typically takes the longest to build and is the most expensive part of a vehicle manufacturing plant because there’s a ton of chemicals used in paints and sealers that are sprayed into the air and need to be controlled, so they don’t hurt the environment. Bentley just upgraded to an all-new paint shop that will reduce its waste material by 45% and cut other harmful emissions by up to 98%. To help celebrate the new facility, Bentley introduced a new paint finish it calls Spectraflair.

DANA TO ABSORB SOME OF EATON
Two legacy automotive suppliers that used to compete heavily against each other, are joining forces. Well, partly. Eaton is going to merge its mobility business with Dana. It’s spinning off its truck transmission, engine and emissions business, which will be absorbed into Dana. It’s all part of a deal called a Reverse Morris Trust that will give Eaton shareholders just over half the shares in Dana. The news broke early this morning so we’ll have to watch how the stock market reacts to the news. But investors clearly knew something was afoot. Dana’s stock is up 42% so far this year and Eaton’s is up 48%.

Cars have become bigger, heavier and so expensive that most people can’t afford to buy a new one. And that’s in the developed world. In the developing world the situation is even worse. What we need is to re-think our transportation system and that’s what today’s Autoline After Hours will be all about. We’ve got Chris Boroni-Bird coming on the show. A lot of you know he was a key R&D exec at Chrysler and General Motors. This will be a deep dive into rethinking mobility, so join John and Gary when the show goes live at 3 pm eastern time.

That wraps up today’s report, but we’d like to give a special shout out to all our members who help us to bring you the most important developments in the global automotive industry.