AD #4330 – Military Procurement Squeezing Auto Components; EREV Sales Crater In China; Polestar U.S. Dealers Likely to Sue Company

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MILITARY PROCUREMENT SQUEEZING AUTO COMPONENTS
As militaries around the world ramp up weapons and munitions production, the auto industry is inevitably getting pulled into it all. In Europe, Mercedes, Volkswagen, Renault and Daimler Truck are launching initiatives to make drones and land vehicles. The Trump Administration recently accused BYD and Baidu of cooperating with the Chinese military, which both companies vehemently denied. In the United States, General Motors is ramping up its defense business unit, and the Trump Administration asked both GM and Ford to explore getting into military production. Now Reuters reports that defense start-ups are slashing the time and cost of making missiles by taking off-the-shelf tech, like the chip sets and sensors that are used by automakers for their ADAS, advanced driver assist systems. There’s already a chip shortage emerging because of the ramp up in data centers cornering the market for DRAMs, specifically DDR4 chips. I don’t know about you, but 2026 is starting to feel like 1914 or 1940. And if you have an uneasy feeling about what’s going on, join the club.

HYUNDAI, KIA, GENESIS SALES UP STRONG
OK, now for some brighter news. It’s the beginning of a new month, which means we’re starting to get June sales numbers from some automakers. The Hyundai Group had a terrific month. Hyundai sold more than 77,500 vehicles in June, up 11% and Kia sold more than 70,000 vehicles, up 10% from a year ago. That was all thanks to their hybrids. Hyundai’s hybrid sales shot up 74% while Kia’s skyrocketed 187%. Hyundai and Kia are both on pace to set record sales in the U.S. for a fourth consecutive year. And the Group’s luxury brand, Genesis, also did well with sales up 10%. Honda is the only other automaker to report sales so far. The brand was up 17% last month and Acura’s sales increased 13%. June sales are forecasted to be up 4-8% and the SAAR is expected to reach 16.1-16.5 million units. And we’ll get a clearer picture of the market once more automakers report sales over the next few days.

EREV SALES CRATER IN CHINA
Ram is supposed to come out with a range extender pickup this year. Ford is said to be working on a steel-bodied F-150 EREV at its Tennessee Truck Plant. EREVs are thought to be the perfect EV technology for full-size pickups and SUVs because you can drive or tow all day long and never worry about range anxiety. But the latest EREV news out of China is worth paying attention to. Between 2020 and 2025 EREV sales in China grew an astounding 78% each year. Last year sales hit 1.2 million units. But this year the segment hit a brick wall. EREV sales fell 25% last month, and for the year they’re down almost 10%. Gasgoo reports there’s three reasons for this. One, there’s fast charging available almost everywhere. Second, the price of batteries has fallen so much that EREVs are no longer cheaper than BEVs. Third, EREVs in China are required to deliver at least 100 kilometers of range, and deliver 30% better fuel economy than the equivalent pure gasoline version, when the battery is depleted. Even though the entire Chinese car market is down, experts at the China Passenger Car Association say the drop in EREV sales is not a blip, and likely signals a change in the marketplace.

TOYOTA, JOBY TO MAKE VTOLS
VTOLs, or vertical take-off and landing vehicles, could be the next big thing in transportation. And a number of automakers want a piece of the action. Toyota and the VTOL startup Joby Aviation announced they’ve formed a joint-venture to manufacture air taxis. They’ll initially focus on establishing the groundwork for commercial production, and in particular will focus on improving productivity, quality and cost. The JV will have two directors from Joby and three from Toyota and Joby will grant the JV exclusive rights to manufacture its aircraft and license some intellectual property on a royalty-free basis. Joby still needs government approval before it can launch commercial operations in the U.S. but everyone expects it to get it.

CATL’S BATTERY SWAPPING BOOM
With fast charging in China that can fill up a BEV in 5 minutes becoming common, you’d think that battery swapping would become passe. But CATL, the largest EV battery maker in the world, is aggressively expanding its battery swapping network. Late last year, its network had 700 stations across 39 cities but in the second quarter of this year, CATL installed 200 stations per month on average and at the end of June, the network grew to 2,000 stations across 180 cities. By the end of the year, CATL is aiming to have 3,000 stations in 190 cities.

ACEA WANTS UK, TURKEY & MOROCCO IN LOCAL CONTENT
The ACEA, which represents all the car companies in Europe, is telling the EU that it should allow the UK, Turkey and Morocco to qualify for local content regulations. Even though the UK embraced Brexit and left the EU, and even though Turkey and Morocco are not EU members, the ACEA says this would protect manufacturing jobs in Europe and reduce the continent’s reliance on Asia. And you know who they’re talking about when they say Asia. The EU is pushing a Made in Europe plan that would require all EV incentives and government procurement to apply only to cars made with 70% European content. Bringing the UK, Turkey and Morocco on board will make it all the easier to hit that goal.

BMW X5 LAUCHES NEUE KLASSE X5
BMW officially launched its 5th gen X5 yesterday. It’s built off the company’s Neue Klasse platform, which accommodates ICE, PHEV and BEV powertrains. The battery version, by the way, uses 120-millimeter cylindrical cells in a big 144-kilowatt hour pack that delivers 435 miles of range, offers fast charging thanks to its 800-volt electric architecture, and provides for bi-directional charging. That big pack helps explain why the electric version of the X5 costs over $81,000, or $10,000 more than the base ICE version. BMW put out a ton of information about this vehicle, far more than we can squeeze into today’s newscast, but we’ve got a link to their press release in today’s show notes. By the way, the X5 is made at BMW’s plant in Spartanburg, South Carolina. Not only is it BMW’s largest plant in the world, on a dollar-value basis, it’s the largest exporter of vehicles in the United States.

POLESTAR U.S. DEALERS LIKELY TO SUE COMPANY
Polestar dealers are devastated that the company will be prohibited from selling cars in the U.S. with the 2027 model year. That’s because its cars rely on Chinese hardware and software involved with connectivity, even though the Polestar 3 is made at the Volvo plant in South Carolina. There are 32 Polestar dealers in the U.S. and they each invested millions of dollars to set up their franchises. And they claim Polestar assured them its future cars would be compliant with U.S. regulations. So we can only imagine that the lawsuits are going to fly fast and thick. One rumor is that Polestar actually wanted the U.S. Commerce Department to kick it out of the country. According to this line of thinking, sales are so dismal that this allows Polestar to walk away from the U.S. market without having to compensate its dealers. But that rumor ignores the fact that Polestar will continue operations in Canada. One thing is true though, sales are dismal. Polestar only sold a little over 13,000 globally in the first quarter and the company is losing billions.

And that brings us to the end of today’s report. And a reminder, Autoline will be off the air next week for our summer break. But please join us again here tomorrow, and thanks to all our members for your critical support to make this show possible.