The automotive industry is amid a period of change and challenge. Supply chain issues continue to trouble manufacturers, while dealers face rising costs and a growing regulatory landscape. Meanwhile, the industry appears to be in transition toward a bigger focus on electric vehicles (EVs), with a mix of market forces and regulatory conditions promoting the manufacture and sale of EVs.
Here is an overview of some of the high-level trends, challenges, and opportunities facing the automotive industry and how to keep track of your most pressing issues.
Supply Chain Concerns Persist
Supply chain issues are plaguing most industries, and the automotive sector is far from an exception. Due to a combination of shipping issues, manufacturing labor shortages, COVID-19 lockdowns in China, and scarcity of key materials, supply chain disruptions have continued throughout 2022.
These challenges, combined with other inflationary forces, have caused automotive prices to soar in recent months. New vehicle prices hit a record high in June with an average price of $48,043, while used car prices are 43 percent higher than they would have been without the pandemic’s influence.
Governments have been taking action in an attempt to slow the runaway effects of supply chain disruptions and inflation. Rising interest rates may cool down the demand for new vehicles, while antitrust action has the potential to loosen bottlenecks and penalize price gouging in the supply chain. Professionals in the automotive industry would benefit from monitoring these regulatory areas to be aware of how they may impact supply and sales.
The regulatory arena is a big focus across the entire automotive industry.Brett Scott, Vice president of government affairs
National Independent Automobile Dealers Association
New Consumer Protections to Impact Dealers
“The regulatory arena is a big focus across the entire automotive industry,” says Brett Scott, vice president of government affairs at the National Independent Automobile Dealers Association. In particular, there are a couple of regulations from the Biden administration that Scott believes people in the industry should be paying special attention to.
One of the most urgent ones is the 2021 update to the FTC’s Safeguards Rule, which requires any company handling customer financial data to improve its cybersecurity. This will affect dealers who provide financing and goes into effect on Dec. 9, 2022.
The FTC is also hoping to decrease prices while making auto sales more transparent through a proposed rule that will prohibit practices like selling so-called junk fees or running misleading pricing advertisements. The goal of this rule is to ensure more fair and ethical practices in the industry, and it is expected to have a net economic benefit of $29 billion over 10 years. But some members of the industry, including Scott, are concerned that compliance with this rule could make car sales more complex for both the dealer and buyer.
Regulations Encourage More Local Manufacturing
Several regulatory conditions aim to bring more auto manufacturing to North America. However, supply chains are complicated and difficult to alter at the best of times, and these conditions may pose challenges to some manufacturers.
For example, the 2020 U.S.-Mexico-Canada Agreement’s Rules of Origin (ROO) stipulation, which requires automobiles to have at least 75 percent of their components manufactured in North America to avoid tariffs, has been difficult to interpret and enforce. Last month, the U.S. International Trade Commission launched an investigation into ROO requirements and plans to issue a report that will provide automakers with more guidance on these rules in June 2023.
Meanwhile, the recent Inflation Reduction Act gave car shoppers new tax credits for electric vehicles, but only if that vehicle is assembled in the United States. This may aid the auto manufacturing sector in the long run, but in the short term, it introduces complications for manufacturers who wish to tap into the burgeoning EV market but don’t yet have the appropriate supply chains.
Emissions Standards Further Push the Growth of EVs
In addition to EV purchasing incentives, government organizations are pushing for emissions standards that will change the kinds of vehicles that can be manufactured. The EPA and the California Air Resources Board have both issued requirements for gradually lowering emissions over time, and these incentives will further push manufacturers to include more electric and hybrid vehicles in their fleets.
Perhaps most notably, in December 2021, the EPA put forward new greenhouse gas emissions standards that will require automakers to meet the strictest fuel efficiency standards ever proposed by model year 2026. Beginning with model year 2023, manufacturers have to improve their fuel efficiency by 5 to 10 percent, with vehicles expected to meet an average fuel economy of 40 miles per gallon by model year 2026.
Other government actions, including California regulations regarding clean trucks and federal funding for low-emission transit buses, indicate that such regulations are becoming more common and spreading to more areas of the auto industry.
How to Keep Track of Automotive Legislation & Regulations
We’ve only scratched the surface of all the new developments occurring in the automotive industry. In this period of change, legal, compliance, and government affairs professionals need resources they can trust to understand new policies and thrive in the evolving automotive industry.
FiscalNote’s solutions provide you with tools and timely intelligence at the global, federal, state, and local levels when you need them, so you can craft and execute successful strategies that keep your team and wider organization in the know.
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