Auto Industry News: PRI Show a Success, Dems Sign Off on USMCA, China’s Auto Market Slumps, More UAW Happenings, and Mitsubishi Recycles EV Batteries in a Clever Way

The auto industry really has plans to make 2019 one for the books, eh? The Dems have signed off on the Trump Administration’s USMCA, proving that bipartisanship can still happen even in a political climate as charged as this one. Automakers are keeping a watchful eye on the Chinese vehicle market, as sales slump for the second year in a row. And the feds are keeping a watchful eye on the UAW, who continues to play Three-card Monte with its high-ranking officials. In more uplifting news though, Mitsubishi finds a clever way to recycle those used EV batteries.

For you speed and performance junkies, PRI wrapped up this weekend in Indy—drawing a crowd 65,000 and putting out exciting new tech, trends, and toys. There’s too much to unpack in this auto news, so check back soon for a full breakdown of the show.

Dems Sign Off on USMCA

In what’s been fair to call an objectively terrible week for the President, there was still at least some effort to be bipartisan on Capitol Hill, as Democrats signed off a new trade deal with Canada and Mexico on Tuesday.

The United States-Mexico-Canada Agreement, or USMCA for short, is a revamped version of NAFTA with a few key changes—some of which are vital for several of world’s largest automakers.

Updating the 1994 pact among the three nations, the new USMCA places more focus on current issues like intellectual property, fair labor, environmental protections, and currency manipulation. Most important for the auto industry, however, are the production requirements necessary to avoid steep tariffs.

Vehicle Production – Parts & Materials

According to the agreement, automakers could only qualify for zero tariffs if a car or truck has 75 percent of its parts manufactured in the U.S., Canada, or Mexico—up from 62.5 percent under NAFTA. Additionally, under the USMCA, 70 percent of a vehicle’s steel and aluminum must come from North America in order to be duty-free.

A last-minute amendment to the bill indicates that the steel must be “melted and poured” within these countries as well, a provision that would “complicate qualification for cars produced in Mexico, whose slabs often originate in Brazil, Japan, and Germany,” points out Bloomberg.

The intention was to close a loophole from 2018, which allowed foreign steelmakers to circumvent Section 232 tariffs by shipping to Mexico, where Mexican steelmakers would slightly change the product and then ship it to the U.S., thereby avoiding the tax. While the loophole is now “closed,” a concession was made to provide time for Canadian and Mexican steel industries to adjust—an extension of seven years.

Vehicle Production – Labor

Another wrinkle in the USMCA is the fair labor component. The new-and-improved NAFTA requires that a large percentage of the vehicle’s manufacturing be done by a worker earning at least $16 per hour. That amount would start at 30 percent, gradually increasing to 40 percent by 2023.

The issue? That’s three times more than the current average wage earned by Mexican auto workers. And while Mexico has passed new laws making it easier for workers to unionize (a precondition of the USMCA), Democrats called for more assurances by demanding monitored enforcement of those laws.

The result is a formal committee that will oversee Mexican labor issues, as well as stationing U.S. labor attachés to ensure compliance. Mexico’s trade negotiator for North America, Jesús Seade, tweeted on Sunday that “Mexico will NEVER accept [the attachés] if it is in any way about disguised inspectors, for one simple reason: Mexican law prohibits it.”

He meets U.S. Trade Representative Robert Lighthizer and U.S. lawmakers in Washington this week to discuss Mexico’s desire for a three-person bipartisan panel, instead. Mexican Foreign Minister Marcelo Ebrard announced Monday, that this dispute does not put the deal at risk.

The legislature of each country must approve the USMCA before it can go into effect and replace NAFTA. While most Americans expect the agreement to pass with no incident, the Senate won’t take up a vote until January or February, a delay thought to reflect Senate Majority Leader Mitch McConnell’s displeasure with the deal, reports The Wall Street Journal.

China Auto Market Slumps (Again)

After the second straight year of dipping numbers for the world’s largest economy, and a third year of decline anticipated for 2020, experts are officially beginning to worry about the Chinese car market.

According to the China Association of Automobile Manufacturers (CAAM), sales will fall 2% next year, to roughly 25.3 million units. That comes after an 8% decline this year and a 3% decline in 2018. While the rate is expected to slow, “There are still no signs of recovery,” said Luo Lei, a deputy secretary-general of CAAM.

There are a few key reasons behind this slump. 

First and foremost, there’s always bound to be some ups and downs in any market. China has been a rock-solid bastion for foreign automakers from all over the world since the late 90s, when the country’s annual auto sales soared to more than 28 million from 1.58 million in 1998. But as the Chinese government contends with a U.S. trade war, consumer spending becomes much more conservative, as buyers postpone big purchases due to economic uncertainty.

Secondly, as Reuters points out, “The implementation of new vehicle emission standards earlier than the central government’s 2020 deadline by 15 cities and provinces, which account for over 60% of car sales in China, spooked buyers too and hurt sales.”

Regardless, new energy vehicles (NEVs) continue to rise in China. They are expected to make up 25% of all car sales by 2025.

“The sales in the second half of the year should become better, but we are not sure to what extent the sales would be,” Shi Jianhua, senior official at CAAM, said. “Perhaps the next three years will be at a low or small negative growth. We’re all looking forward to sales picking up, but it’s normal if we don’t get that.”

All in all, the falling sales figures are something to keep an eye on for the global automotive industry. But while these sales numbers do look dismal at the moment, it’s far from a death knell. IHS Markit expects the country’s auto sales to hit an estimated 33 million units by 2024, proving that there is room for profit and growth. Additionally, President Trump and China confirmed a tentative trade agreement on Friday. A good sign, although reports indicate there is still “significant ambiguity” surrounding the deal.

More UAW Happenings

As we’ve covered in previous Auto News, it’s safe to say the UAW has had an interesting year, to say the least. As many as 13 UAW officials have been charged as a result of a federal corruption investigation surrounding the improper use of union funds. The charges include some doozies, such as embezzlement, mail and wire fraud, money laundering, and conspiracy to defraud the United States.

As remaining officials wrap-up a labor deal with FCA, which was recently approved with 71% worker favor, they face a tall order for getting the union back on the straight and narrow.

Here’s a shortlist of some of the other issues the UAW is dealing with: 

… The feds continue to investigate a fire that occurred at UWA headquarters back in July, reviewing subpoenaed visitor logs and security camera footage as part of their larger corruption investigation. The Detroit Fire Department investigator ruled out arson, but a cause is still unknown.

“The blaze received added attention after the feds in October charged former UAW official Edward Robinson in the corruption probe. According to the charging documents, “UAW Official A,” who The News first identified as former UAW President Gary Jones, told an aide earlier this year he wished they ‘burned the records’ related to the alleged scheme to embezzle union dues. The fire occurred three months later.” -Automotive News

… The UAW is officially disbanding Region 5, an administrative subdivision consisting of 17 states, due to the scandal surrounding the embezzlement scandal.

… Due to the 40-day strike at GM, workers are now on (temporary) mandatory overtime to restock dealerships and make up for the gap in time.

With only a few weeks left in 2019, it’s safe to say that everyone in the UAW is likely hoping for a fresh start in the new year.

Mitsubishi EV Plant to Run On Used EV Batteries

An ever-present criticism against the rise of EVs revolves around the very thing that makes them special in the first place: their batteries. Many have pointed out the lack of large-scale recycling efforts for old, used-up batteries. The fear is that this could lead to toxic waste and hinder universal implementation.

Thankfully, Mitsubishi is working to combat that criticism.

The Japanese automaker committed to partially powering its Okazaki City plant with batteries previously used in its electric vehicles. A factory making EVs, powered by the batteries used in those same EVs? That’s an interesting and innovative angle to drum up some attention for the cleaner, greener future.

The system is capable of pumping out 3 Gw of power per year, along with storing 1 MWh of energy via a utility-scale rooftop photovoltaic system for later use in case of power outages. The PV and battery-storage system are expected to reduce the factory’s carbon footprint by roughly 1,600 tons per year, making major strides toward being carbon neutral.

Mitsubishi is among a shortlist of other brands who have made use of second-hand batteries instead of burying them in a landfill. BELECTRIC is a German solar and battery company using old Audi batteries to build a 1.9 MWh energy storage system. Nissan, found use for its old Leaf batteries in sports stadium across Europe. And Rivian used old pickup truck battery packs to create a makeshift microgrid in Puerto Rico after Hurricane Maria in 2017.

So, what do you think about all this?

Do you support the USMCA? Think China’s auto market will sort itself out? What about the UAW’s never-ending scandal? And where do you fall on EVs? We’d love to hear your thoughts in the comments below. Plus, don’t forget to tune in for PRI coverage!