Foley Automotive Update

Key Legal Insights from Foley’s Automotive Team

Analysis by 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

• Foley & Lardner announced the launch of its 2026 AI in Manufacturing & Supply Chain Series, a new initiative to help industry participants identify and manage the legal risks and business strategies arising from the profound shifts and innovations reshaping manufacturing and supply chain operations. The most recent article in the series is Digital Twin Technology and Predictive Analytics in Manufacturing Supply Chains: Preventing Data-Driven Supply Chain Disputes. Subscribe here to get updates about new articles in this series.

• President Trump announced he will raise U.S. import tariffs on European cars and trucks to 25% from 15% if the 27-member bloc does not formally approve by July 4, 2026 a previously negotiated framework trade deal.

• As of May 11, the Trump administration was issuing more than $35.5 billion in refunds to importers whose tariff-refund claims were approved after the U.S. Supreme Court ruled the president’s IEEPA-based tariffs were unlawful.

• A federal appeals court temporarily paused a decision that had found President Trump’s new global tariffs—imposed under Section 122 of the Trade Act—were unlawful.
• In a recent letter, seven major automotive trade associations urged the U.S. Trade Representative to extend the U.S.-Mexico-Canada Agreement (USMCA), rather than pursuing separate bilateral deals.

• Automotive News provided an update on the Trump administration’s potential priorities for USMCA negotiations with Mexico.
• A number of key stakeholders in the Canadian auto industry expect USMCA negotiations to extend past the July 1, 2026 timeline for the agreement’s scheduled review. 

• GlobalData revised its 2026 U.S. light-vehicle sales forecast to 16.0 million units, representing a downward adjustment of approximately 100k units. The stand-off between the U.S. and Iran was cited as the reason for the revision, and GlobalData stated, “While we continue to assume that a solution will eventually be found and that oil prices will fall later in the year, there is enough uncertainty to lead us to be more cautious with the 2026 forecast.”

• Analysts and oil executives warned that shortages of key fuels in certain markets, and escalating prices,are a growing risk in the coming weeks if shipping does not resume in the Strait of Hormuz.

OEMs/SUPPLIERS  

• More than 60 auto suppliers operating in the U.S. are owned by companies located in China, according to analysis from consulting firm AlixPartners.
• For fiscal year ending March 31, 2026, Toyota reported an operating loss in North America for the first time in sixteen years and noted it was unable to fully offset the impact U.S. import tariffs. The automaker’s most recent guidance is projecting lower profit due to higher costs of fuel, transportation and paint due to the Iran war, as well as the ongoing impact of U.S. import tariffs.

• Honda reported its first annual profit loss since becoming a publicly traded company approximately 70 years ago. The automaker’s $2.7 annual profit loss was due largely to its costly retreat from ambitious EV targets.

• GM agreed to a $12.75 million settlement over allegations it illegally sold the location and driving behavior data of California drivers to third-party data brokers. This represents the largest California Consumer Privacy Act (CCPA) penalty to date.

• Toyota is reported to be considering a $2 billion investment to expand production in San Antonio, Texas.
• Stellantis will expand a partnership with Leapmotor to jointly develop vehicles for the European market at two existing factories in Spain.

• German auto-parts maker Schaeffler plans to deploy “thousands” of humanoid robots from British AI and robotics company Humanoid in its factories beginning in late 2026.
• Canadian union Unifor is scheduled to begin negotiations over a new collective bargaining agreement with Ford on June 22, 2026.

AUTONOMOUS TECHNOLOGIES AND VEHICLE SOFTWARE

• A number of surveyed automakers expressed reduced confidence in data monetization, citing regulatory hurdles, limited consumer demand, and weaker-than-expected returns.
• AI agents capable of autonomous decision-making could debut in certain automakers’ vehicle infotainment systems as soon as later this year.
• GM is utilizing AI technologies to support and accelerate vehicle design and autonomous vehicle development.
• A proposed class action filed this month in New Jersey federal court alleges defects in Subaru’s “EyeSight driver assist technology” may cause certain models to abruptly stop without reason and increase the risk of collisions.

MARKET TRENDS AND REGULATORY

• Morgan Stanley predicted U.S. gasoline inventories may fall below 200 million barrels by August 2026, representing a record seasonal low.
• A digital tracker from Brown University’s Watson Institute estimates that U.S. households have paid over $300 in additional costs per household related to higher gasoline and diesel prices following the start of the Iran war.
• First-quarter 2026 total light-vehicle sales within China fell 22% year-over-year to 4.9 million units, while exports rose 58% YOY to 2.1 million units. According to data from the China Passenger Car Association, over 50% of China’s total vehicle exports in April were EVs or hybrids, and this represented the first time the nation’s new-energy vehicle exports surpassed those of internal combustion engine vehicles. 

HYBRID AND ELECTRIC VEHICLES

• Tesla will invest approximately $250 million in its Berlin-Brandenburg factory to increase battery cell production for EVs.
• Stellantis will partner with Dongfeng to produce EVs in China under the Peugeot and Jeep brands. The companies will invest up to $1.2 billion in the initiative.
• At the beginning of May, hybrid vehicles on average had the lowest days’ supply and were the quickest to sell from U.S. dealerships when compared to other types of powertrains. 
• A new AAA study indicates that hybrid vehicles, like battery electric vehicles (BEVs), experience reduced fuel efficiency in cold weather. On average, hybrids lose 22.8% fuel economy in freezing temps, while EVs decline by 35.6% MPGe.
• The Wall Street Journal reported on Ford’s efforts to develop an all-electric pickup truck that can compete with Chinese brands and will be priced at approximately $30,000.
• Michigan may be offering an incentive package to electric pickup truck startup Slate Auto to support expansion in the state, according to a report in Crain’s Detroit.
• Chinese EV makers including BYD, Chery, Geely, and Zeekr are reported to be making progress toward the launch of EV sales in Canada later this year.