This week we are joined by a special guest, Yen Chen, Principal Economist at CAR. Yen covers and shares his thoughts on the latest Hot Topics happening in the automotive industry.  If you would like to receive this bi-weekly insight into critical industry issues you and your organization are facing, sign up for our mailing list here to get Hot Topics sent directly to your inbox.  

UAW Lost Vote to Unionize Mercedes-Benz Tuscaloosa Plant: 

• What’s at stake in the union election at a Mercedes-Benz plant in Alabama

• Mercedes workers turn down UAW
• Mercedes-Benz workers in Alabama vote against UAW union membership
• Mercedes-Benz workers in Alabama vote against unionizing in blow to big UAW push
• Mercedes-Benz workers in Alabama vote against joining UAW, a blow to union’s expansion in the South

Yen’s thoughts:

The workers at Mercedes-Benz Plant Tuscaloosa are already receiving a top-tier wage of $34 per hour, one of the highest in the manufacturing sector in Tuscaloosa, Alabama. Before the vote, Mercedes-Benz announced an increase in the starting wage for its production workers to $23.50 per hour, nearly matching the UAW-D3’s rate of $25.20 per hour. From an economic perspective, the union’s offers appear marginal to the workers. Non-economically, it is likely that the company has promised improvements in working conditions, and workers value the current company culture and employer-employee relationships more than union representation. The 44/56 vote split indicates a clear decision against unionizing at the Mercedes-Benz Plant Tuscaloosa. Still, it will not deter the union from targeting the next non-union automakers in the region. We can expect the UAW to reorganize and focus on its next objective in the near future.

New Tariffs on Chinese Imports:

• How stiff new U.S. tariffs against China may impact auto industry
• Xpeng says US tariffs on Chinese EVs detrimental to meeting carbon neutrality
• Biden hiking tariffs on Chinese EVs, solar cells, steel, aluminum — adding to tensions with Beijing
• What Biden’s tariffs on Chinese imports may mean for American jobs, the economy and inflation
• Biden sets huge new tariffs on electric vehicles, chips and other goods from China
•  

Yen’s thoughts:

On May 14, 2024, the Office of the United States Trade Representative (USTR) released a review of the statutory report on Section 301 investigation of China’s unfair trade practices. The Biden administration directed the USTR to take further action and increase tariff for certain products imported from China. On the list of the proposed tariff modification, battery electric vehicles’ tariff will increase to 100%, from the current 25%. Lithium-ion batteries for EVs and battery parts’ tariff will increase to 25% from the current 7.5%.

These additional tariffs will effectively prevent cheap Chinese EVs from entering the U.S. market in the future, and significantly hamper the imports of Chinese EV batteries and battery parts. In 2023, the U.S. imported a total of $19 billion worth of BEVs, of which Chinese BEVs accounted for merely 1.8%. The majority of imported BEVs came from Germany (29.2%), South Korea (23.2%), and Mexico (19.9%).

However, the imports of EV lithium-ion batteries and battery parts present a different picture. Last year, the United States imported 3.5 billion USD worth of lithium-ion batteries for EVs and 15.0 billion USD worth of other lithium batteries and parts, with imports from China accounting for 65.1% and 71.7%, respectively.

The new tariffs on Chinese BEVs and batteries will provide U.S. automakers and EV battery suppliers more time to catch up with their Chinese competitors. On the other hand, these tariffs are also likely to limit the source of batteries and battery parts for U.S. automakers, potentially leading to higher prices of BEVs available for U.S. customers. This tariff approach might not be the optimal solution to counteract the Chinese competition, but considering the U.S. manufacturing jobs and employment, it is currently the only available strategy for the United States.

Auto Parts Made by China’s Forced Labor are in Imported Vehicles by BMW, Jaguar Land Rover, and VW: 

• Senate report finds parts made with China’s forced labor in cars by BMW, Jaguar Land Rover and VW
• Senate Inquiry Finds BMW Imported Cars Tied to Forced Labor in China
• BMW imported 8,000 vehicles into US with parts from banned Chinese supplier, Senate report says

Yen’s thoughts:

The issue of dubious parts in the vehicles sold in the United States is not news. In 2022, Hyundai and Kia were reported to have purchased lights and mirrors from several suppliers in Alabama who illegally hired child labor in the factory. In 2023, The New York Times reported that several automotive suppliers in West Michigan illegally hired migrant child labor to produce automotive parts for General Motors and Ford.

Automakers are generally diligent in ensuring their suppliers conduct their business legally. However, there are more than 5,000 automotive suppliers in the United States alone, and a typical modern vehicle contains more than 30,000 parts. It is impractical for automakers to trace the legitimacy of every part and inspect every sub-tier supplier regularly. This case happened in BMW, JLR, and VW is not isolated, and likely will not be the last. Suppliers who violate the supplier code of conduct will face severe consequences, including criminal charges and the termination of business relationships.