Foley Automotive Update

Key Legal Insights from Foley's Automotive Team

Analysisby Julie Dautermann, Competitive Intelligence Analyst

Foley is here to help you through all aspects of rethinking your long-term business strategies, investments, partnerships, and technology. Contact the authors, your Foley relationship partner, or our Automotive Team to discuss and learn more.

KEY DEVELOPMENTS

• On February 20, the U.S. Supreme Court ruled 6-3 that President Trump exceeded the limits of the International Emergency Economic Powers Act (IEEPA) when he imposed global, reciprocal, and fentanyl-based tariffs. Foley & Lardner is analyzing the impact of the Court's decision, including potential scenarios and ramifications regarding the right to IEEPA tariff refunds.
• Foley & Lardner attorneys Alejandro Gómez-Strozzi and John Turlais analyzed Mexico's expanding role as the United States' leading trade partner in the Mexico Business News article, "Mexico Emerges as the US' Most Competitive Trade Partner." Gómez-Strozzi and Turlais commentary also appeared in Supply & Demand Chain Executive.

• In advance of a February 12 Senate Finance Committee hearing, "The U.S.–Mexico–Canada Agreement: Evaluating North American Competitiveness," the National Association of Manufacturers urged lawmakers to "focus discussion on making fine-tuned improvements" to the agreement, while preserving continuity. The NAM also stated the "USMCA is the most pro-U.S. manufacturing trade agreement in history."

• Prime Minister Mark Carney indicated the Canadian government will "prepare for all possibilities" regarding this year's USMCA review. Carney recently announced plans to revise the tariff system to establish stronger financial incentives for automakers to invest in Canada.

• GM recently held an urgent supplier meeting to assess exposure to bankrupt auto parts company First Brands Group, according to a report in Crain's Detroit.

• Potential supply constraints of dynamic random access memory (DRAM) and other types of memory chips caused by heightened demand in artificial intelligence applications may raise prices or curtail supplies to certain automakers.

• The Wall Street Journal reports U.S. automakers are "racing" to replace certain legacy software in internet-connected vehicle systems to comply with upcoming national security restrictions. A January 2025 Commerce Department final rule that prohibits the import and sale of connected vehicles and related components linked to the People's Republic of China (PRC) and Russia due to national security concerns had excluded "legacy code designed, developed, manufactured, or supplied prior to March 17, 2026" to "provide regulated entities time to transfer intellectual property rights as well as responsibility for development and maintenance of code to within their organizations in order to come into compliance with the covered software prohibition."

• Foley & Lardner partner Lauren Loew highlighted recent automotive plant investments in the Manufacturing.net article, Sun Belt States See Manufacturing Growth from Supply Chain Revamps.

• Foley & Lardner partners Amanda Beggs and Peter Tomasi assessed the ramifications of a final rule issued by the U.S. Environmental Protection Agency on February 12 to rescind the 2009 "Endangerment Finding." The Obama-era climate regulation had concluded that certain greenhouse gases pose a threat to public health and welfare, and formed the basis for a significant portion of U.S. emissions standards and climate policy.

• GM, Ford, Honda, and Stellantis have collectively announced roughly $50 billion in EV-related write-downs. For example, Stellantis announced €22 billion ($26 billion) in charges related to the "reset" of EV development plans, while Ford estimated it will lose over $20 billion on its EV business between 2022 and year-end 2026.

• On February 11, the U.S. House voted 219-211 to terminate the International Emergency Economic Powers Act (IEEPA) declaration that serves as the foundation for President Trump's tariffs on Canada. The measure will head to the U.S. Senate. However, it is unlikely Congress could achieve a two-thirds majority in both chambers to override an anticipated presidential veto. Over 1,000 companies have filed lawsuits to seek tariff refunds, arguing the executive orders serving as the basis for the import duties are unlawful.
• The Trump administration could be considering revisions that adjust the scope of its 50% import tariffs on steel and aluminum, according to reports in Bloomberg and The Wall Street Journal.

• The U.S. Trade Representative announced the signing of a previously announced trade agreement with Taiwan that will limit the U.S. "reciprocal" tariff rate on Taiwanese goods to no more than 15%.

• President Trump has threatened, in a February 9 social media post, to delay the opening of the new Gordie Howe bridge between Detroit and Windsor until the U.S. is "fully compensated," leading to auto industry concerns over the increased risk of supply chain and border trade disruption.

OEMs/SUPPLIERS

• Toyota's Chief Financial Officer, Kenta Kon, will be promoted to CEO, effective April 1, 2026. The automaker's current CEO, Koji Sato, who has been in the role since 2023, will become Vice Chairman and the newly established role of Chief Industry Officer. The automaker has estimated it will incur $9.7 billion in tariff-related costs in its fiscal year ending March 2026.

• Honda's Chief Financial Officer, Eiji Fujimura, will assume the role of Senior Managing Executive Officer and CEO of American Honda Motor on April 1. The automaker recently reported a 48% drop in operating profit for the nine months ended December 31, 2025, due to challenges that included a $1.7 billion charge attributed to EV-related impairments and the impact of U.S. tariffs.

• Novelis, a key aluminum supplier to Ford, expects its fire-damaged plant to resume operations by June 2026.

• The German Association of the Automotive Industry (VDA) found that 72% of recently surveyed German auto suppliers plan to reduce, postpone, or cancel domestic investments.

• Volkswagen plans to reduce costs by 20% across all its brands by the end of 2028,amid challenges that include heightened competition, reduced profits in China, and the impact of U.S. import tariffs.

• Ford CEO Jim Farley reportedly spoke with certain Trump administration officials about potential scenarios that would protect domestic companies while allowing Chinese automakers to manufacture vehicles in the U.S.

• The Wall Street Journal assessed how the rise of a Chinese automotive glass plant in Ohio is threatening jobs at a competing glass factory that has operated in the area since the 1950s.

MARKET TRENDS AND REGULATORY

• China's Ministry of Industry and Information Technology proposed new rules to require physical buttons or switches for certain vehicle safety functions, amid safety concerns over touchscreen failures and driver distraction.
• Updated assessment protocols from Europe's safety rating program, Euro NCAP, will deduct points for vehicles that do not have physical controls for features that include turn signals, wipers, horn, and hazard lights.
• Automotive News provided an update on automakers' plans to develop humanoid robots.
• The Detroit Three automakers are assessing whether to bring back sedan models to address vehicle affordability challenges and reach entry-level consumers. Higher profit margin SUVs, crossovers, and pick-up trucks comprised over 80% of U.S. light-vehicle sales in 2025.

AUTONOMOUS TECHNOLOGIES AND VEHICLE SOFTWARE

• Automotive News provided an overview of the costs and challenges associated with maintaining the technology in software-defined vehicles (SDVs) over the life of the vehicle.
• J.D. Power's 2026 U.S. Vehicle Dependability Study (VDS) found that persistent problems with infotainment system performance and the inconsistent effectiveness of over-the-air (OTA) software updates are contributing to the decline of vehicles' long-term dependability.
• Kelley Blue Book reports thieves are increasingly targeting certain vehicle radar sensors that can cost drivers thousands of dollars to replace.
• The capabilities and limitations of hands-free driving systems continue to confuse a notable percentage of drivers, according to a report in The Wall Street Journal.

HYBRID AND ELECTRIC VEHICLES

• LG Energy Solution acquired full ownership of the NextStar Energy battery plant in Windsor, Ontario after purchasing a 49% stake from joint venture partner Stellantis. Stellantis is also reported to be considering an exit from its U.S. battery joint venture with Samsung.
• The U.S. Department of Transportation announced a proposal to increase "Buy America" requirements for government-funded EV charging stations from the current 55% domestic content requirement to 100%.
• A Washington federal judge consolidated two lawsuits seeking to halt the Trump administration's suspension of nearly $2.5 billion in congressionally appropriated funds from distribution to EV charging infrastructure programs.
• Toyota plans to release an all-electric three-row Highlander SUV model in the U.S. later this year.
• Canada reinstated a federal EV rebate program this month, offering up to $5,000 for qualifying new battery-electric vehicles and $2,500 for plug-in hybrid EVs. Canada recently replaced its electric-vehicle sales mandate with more stringent tailpipe-emissions standards that seek to achieve carbon reduction equal to 75% of EV sales by 2035.
• China's BYD was the world's sixth largest automaker based on 2025 sales volumes, ranking above Ford for the first time. BYD has lost more than $60 billion in market value in the last nine months amid investors' concerns over profitability and sales projections for the Chinese EV sector.
• The European Commission is considering a proposal that would require 70% local content rules for EVs sold in the bloc to qualify for subsidies.

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