Automotive Supply Chain Resiliency in 2023: Thought Leaders Gather to Discuss Shift to Electrification | Foley & Lardner LLP

Automotive Supply Chain Resiliency in 2023: Thought Leaders Gather to Discuss Shift to Electrification | Foley & Lardner LLP

The Society of Automotive Analysts (SAA) and Foley & Lardner welcomed dozens of thought leaders to Detroit for a discussion and reception on issues affecting the resiliency of the global vehicle supply chain focusing on the systemic shift to electrification.

SAA is an indispensable industry resource that has provided data and solutions to participants in the mobility and automotive sectors since 1987. The event focused primarily on the opportunities and unique challenges suppliers face as they work to align with the industry’s massive investment in electrification amid changing and uncertain credit markets and geopolitical landscapes.

An overview of the State of Michigan’s Electrified Vehicle (EV) strategy framed the discussion following welcome remarks by Foley partners Ann Marie Uetz and Steve Hilfinger. Kathryn Snorrason, Interim Chief Mobility Officer for the State of Michigan Office of Future Mobility and Electrification (OFME), and Janine Ward, Program Manager, kicked off the event by leading the group through an overview of the competitive landscape for attracting EV investment. Snorrason and Ward were joined at the event by Quentin Messer, CEO of the Michigan Economic Development Corporation which houses the OFME.

The OFME discussed the state government’s role in collaborating with businesses to enhance mobility ecosystems and highlighted ways in which Michigan is developing dynamic mobility and electrification policies aimed at promoting the startup and scale-up of emerging technologies and businesses. Steps taken by the State of Michigan to attract, compete for, and win transformational EV projects were central to the discussion, such as the Critical Industry Program aimed at qualified job creation as well as attracting significant capital investment. Snorrason and Ward also provided commentary on the manufacturing, technology, and workforce resources most likely to determine the regions which will ultimately emerge as market leaders as the industry evolves and electrifies.

Foley automotive supplier specialists next led a discussion on legal issues accompanying the world’s shift to vehicle electrification. Lynn Gandhi shared an overview of federal, state, and local incentives and tax credits which are most likely to affect EV resiliency. This included a review of the significant opportunities posed by the Inflation Reduction Act of 2022 (IRA), Internal Revenue Code (IRS) Section 30C tax credits for electric vehicle charging stations and IRS Section 30D tax credits for clean vehicle purchases, and the myriad of state and local incentives for EV development and infrastructure. In providing an overview of the requirements and eligibility for such incentives, Lynn emphasized the importance of timely determining eligibility for those seeking to participate in these unprecedented incentives. Numerous 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.

She discussed changes to the Plug-In Electric Drive Vehicle Credit, and EV Charging Station Tax Credits, as well as critical changes relating to the authorization of the National Electric Vehicle Infrastructure (NEVI) Formula Program.

Foley Intellectual Property (IP) Senior Counsel Robert Okonowski shared strategies for suppliers executing strategic IP development. He led those gathered through best practices for suppliers seeking to establish an efficient, risk-adjusted portfolio of IP assets. He also stressed that for suppliers – as increasingly technology-focused companies that rely heavily on innovation – development of a patent portfolio “moat” is often critical for establishing and expanding their competitive edge. Robert emphasized the importance of ensuring that open lines of communication exist between legal, business, and engineering teams to ensure that all stakeholders are aligned on an overall strategy. Important strategic objectives to consider are a supplier’s competitive landscape, including competitors’ IP portfolio and litigiousness. Robert advised suppliers to consider their place in the supply chain and focus now on IP assets that are likely to have increasing importance in the future, to ensure that suppliers are well positioned to capitalize on their IP portfolio through opportunities such as licensing and royalty revenue. 

Nick Ellis, who routinely counsels supplier clients on supply chain issues, next shared tips for new-supplier entrants to the mobility industry. As mobility contracting can have a steep learning curve, he shared commercial contracting considerations which can help to ensure suppliers’ obligations are met and relationships with business partners remain healthy. Nick explained 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. He 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.

To culminate the discussion Steve Wybo, Automotive Practice Lead & Senior Managing Director for Riveron, led an industry review discussion surveying the past several model years. He also shared his outlook on the year to come. He discussed how over $1 trillion of investment to date in EV infrastructure means there will be no near-term “turning back” from the shift to the electrification of vehicles, as well as the possible effects that cost-of-capital increases could have on Original Equipment Manufacturers (OEMs) and their supplier networks. For suppliers in legacy ICE components, he shared sentiments on making the best use of the next decade to evolve, as well as the factors he saw as most critical to industry success in the coming year. Much of the industry’s success over the next few months, he concluded, would turn on the ability to balance the competing interests of keeping consumer demand high, input costs controlled, and staying ahead of macroeconomic concerns caused by lending markets, and financial unrest, labor demands, and geopolitical factors. While there is much for the industry to be optimistic about, no shortage of work and sales must occur for that optimism on EVs to successfully come to fruition.

Foley continues to monitor developments in the area of Electrified Mobility and Infrastructure and will keep readers informed about any major developments that come down the line. For the most up-to-date material, follow our blog, Dashboard Insights.

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