Foley & Lardner Briefs Mexican Auto Suppliers on U.S. EV Developments
Foley & Lardner attorneys were honored this week to present an update on EV developments in the U.S. to members of Mexico´s National Autopart Industry Association [Industria Nacional de Autopartes, INA). INA´s Director General, Alberto Bustamante, served as host for a panel led by Alejandro Gomez, a partner in Foley’s Mexico City Office and a member of Foley’s automotive team.
Chris Grigorian, a partner in Foley’s D.C. Office, led off the discussion with an overview of the basic regulatory framework in the U.S. that is administered by the National Highway Traffic Safety Administration (NHTSA). Chris reviewed the various ways in which NHTSA exercises its authority, including developing and enforcing safety standards, conducting defect investigations, managing recalls, and conducting vehicle safety research. He went on to review Federal Motor Vehicle Safety Standard (FMVSS) 305, governing batteries and electrolyte spillage. Chris noted that a proposed amendment to FMVSS 305 is in the works at NHTSA and is expected to be released for public comment soon. The amendments are expected to more comprehensively cover batteries and other aspects of EVs than the current regulation. Chris also reviewed some of the EV-related research activities currently underway at NHTSA. Finally, Chris noted the roles played by EPA and the California Air Resource Board in regulating EVs.
Steve Hilfinger, a partner in Foley’s Detroit Office, then led a review of the various U.S. federal, state and local programs, tax credits and incentives that are catalyzing the development, production and sale of EVs, batteries, EV chargers and other clean energy equipment. This included a review of the $7.5 billion NEVI program under the Bipartisan Infrastructure Law, the opportunities posed by the Inflation Reduction Act of 2022 (IRA) and complying with related “Buy America” provisions, the Chips Act and the myriad of state and local incentives for EV development. This included the substantial incentives being granted to battery plants, such as the recently announced/planned $3.5 billion Ford battery plant near Marshall, Michigan. Opportunities exist for bringing final assembly and sourcing to the U.S., to comply with the various requirements of the IRA and to take advantage of expected market opportunities in the U.S.
Jon Gabriel, a partner in Foley’s Boston Office, reviewed strategies that companies are employing to use M&A, joint ventures and other investment activities to accelerate their development of EV technologies. These included venture capital-style investments in early stage technologies, which are often accompanied by a joint development agreement (JDA), some of the structuring considerations for joint venture agreements (JVAs), and a number of the due diligence and structuring issues applicable to M&A transactions in the EV space. Jon noted that each of these techniques can be considered as an alternative path or supplement to self-funded capital investments, which are often substantial in the EV space.
Nicholas Ellis, a partner in Foley’s Detroit Office, wrapped up the panel by discussing the various supply chain opportunities and challenges that the transition from ICE powertrains to EVs presents for suppliers. These included the upsides and risks associated with dealing with new technologies, new companies in the industry and new relationships that must be forged in the face of substantial uncertainties and risks. Nicholas encouraged the auto suppliers present to evaluate their EV strategies and related supply chain issues as early as possible, to best navigate the migration to EVs or to inform companies on alternative paths they may take (including sale if that is consistent with the company’s prospects and strategy).
The session wrapped up with a Q&A session, which revealed the intense interest of Mexican suppliers in the migration to EVs, that is being led in the U.S. and other places but which will have significant impacts on the Mexican automotive industry.
