AD #4362 – GM Engine Recall Expands Over Failures; 50% U.S. Tariffs Threaten Truck Production; European EV Sales Surge 51% In July

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

GM ENGINE RECALL EXPANDS OVER FAILURES
General Motors and Ford face big problems with their biggest profit generators: full size trucks. Let’s start with GM. Last year GM voluntarily recalled almost 721,000 pickups and SUVs globally for potential V8 engine failures. GM blamed supplier issues with connecting rods and crankshafts, which resulted in some engines needing to be replaced, but it did not say how many. However, it reportedly costs over $10,000 to replace one of those engines and GM spent more than $5.2 billion last year in warranty and recalls. GM thought it had solved the problem by putting thicker oil in the engines it did not replace, but the engines are still failing. So NHTSA is expanding its U.S. investigation which could potentially add another 300,000 engines to the list. 

50% U.S. TARIFFS THREATEN TRUCK PRODUCTION
Now, over to Ford. When the UAW shut down its Kentucky truck plant during the 2023 strike, it was a crippling blow to the company. That facility is the source of its heavy-duty F-Series trucks, which are extremely profitable. So Ford moved part of the production of those trucks to its Oakville plant in Canada and are about to start rolling off the line any day now. GM also makes heavy duty pickups in Canada. But yesterday, trade talks collapsed between Canada and the Trump Administration, and now it looks like those trucks will be hit with 50% tariffs coming into the United States. The Trump Administration’s tariffs are costing automakers billions of dollars in higher costs every year. And the tariffs on those heavy-duty trucks will be especially damaging to GM and Ford. 

AUTO LOAN APPROVALS RISE DESPITE DELINQUENCIES
Despite car loan delinquencies hitting near-record highs, auto credit availability was at its highest point in nearly 11 years in July. According to the Federal Reserve Bank of New York, 5.5% of the U.S. auto debt was at least 90 days behind on payments in the second quarter, which is just shy of the record set in the first quarter of the year. But despite the uptick in delinquencies, Cox Automotive reports auto lenders approved 74% of credit applications in July, which is the same as a year ago. That’s because lenders are finding that while more borrowers are behind on payments, fewer are actually defaulting. According to Equifax, lenders only wrote off 0.2% of auto debt during the second quarter, which is the same rate as last year. It’s not clear why defaults and delinquencies are diverging, but as long as borrowers aren’t defaulting, lenders appear willing to make credit available.

 

VOLKSWAGEN WORKERS RESIST PLANNED PLANT CLOSURES
Volkswagen is in a crisis, but its unions and workers don’t want to hear it. They say they’re unsettled and frightened by management talking about possibly closing 4 plants in Germany and getting rid of 100,000 workers. Oliver Blume, VW’s CEO, says the company’s overhead or structural costs are 30% higher than other large automakers, and that it needs deep cuts. Reuters reports that VW’s works council conducted a survey of workers who criticized the board for its “disastrous external communication.” Here’s our Autoline Insight. No one likes to hear that their job is threatened. At the same time, it’s a whole lot better to know what you’re up against versus sticking your head in the sand. 

GM REACHES TENTATIVE DEAL WITH UNIFOR
General Motors and Canadian union Unifor have reached a tentative agreement on a new labor deal. The 4,600 unionized workers at four GM plants in Ontario will vote to approve it later this month. The details of the agreement aren’t known yet but earlier this month Ford and Unifor reached a deal that included 3% annual wage increases, $10,000 signing bonuses and a $1 billion investment commitment for continued vehicle and engine production in Canada. So, it’s likely GM workers will receive a similar deal. Once a deal with GM is ratified, Unifor will begin negotiations with Stellantis. But who knows what will happen with the new 50% tariffs?

EUROPEAN EV SALES SURGE 51% IN JULY
EV sales in Europe are easily outpacing the rest of the market. While overall sales were up just over 4% in July, according to Dataforce, EVs were up 51% to 277,000 units, representing a quarter of all European sales. EVs even outpaced plug-in hybrid sales, which were up 15%, and hybrids, which were up 9%. The VW Group had the two best-selling EVs last month with the Skoda Elroq topping the list, followed by the VW ID.4. Somewhat surprisingly those beat out the Tesla Model Y, which was Europe’s best-selling EV in June, but it fell out of the top 10 completely in July. However, this could just be a blip. Tesla’s sales in the region through June are up 75% compared to the same period last year. The jump of EV sales in Europe is likely due to fuel prices remaining high and more new models hitting the market.

CHINESE AUTOMAKERS SEE BIG GROWTH IN ITALY
Chinese automakers are also benefitting, especially contributing to the growth of plug-in hybrids in Europe, and seeing increases in select markets like Italy. Chinese brands accounted for 11.5% of July sales in Italy, up from 6.2% last year, and BYD cracked into the top 10 of sales. 

    

XPENG ROBOT UNIT RAISES $900 MILLION
Chinese automakers see big bucks in humanoid robots. Last week, Chery revealed it’s in talks for an IPO for its AiMOGA robotics subsidiary. And now XPeng’s robot unit called Dogotix is planning to raise $900 million. $600 million will come from outside investors including Alibaba and Tencent, $200 million from Xpeng and $100 million from top executives. Dogotix will be valued at more than $6 billion after the transaction.

CHINA ISSUES MASSIVE INTERIOR DOOR RECALL
China is issuing its largest-ever recall. It covers over 4.3 million vehicles from BAIC, Chery, Dongfeng, FAW Hongqi, Geely, Leapmotor, Tesla, Xiaomi, and Xpeng. And it’s all about emergency interior door releases that are too hard to find, if the main, electronic opener fails. As a fix, automakers will have to install bright warning labels to the emergency releases and roll out an OTA update that will lower the window after an accident. Tesla will be the most impacted, accounting for 2.9 of 4.3 million recalled vehicles. This recall comes after China issued new standards for door handles recently, which also includes exterior door handles and go into effect in January of 2027. 

U.S. MILITARY LOOKING FOR AUTOMOTIVE PARTNERS 
We’re seeing a growing convergence between the military and the auto industry in the US and Europe. The military is looking to ramp up procurement faster and the auto industry is looking for new areas of business. You might want to check out an interview we posted with Major General Paul Rogers of the Michigan National Guard who explains what they’re looking for and why. You can find that video on the Autoline website and our YouTube channel.

But that’s a wrap for today’s show. Thanks for tuning in.