Automotive Industry Is at a Crossroads
As a result of the global chip shortage and the ongoing Coronavirus pandemic in 2021, the automakers have come to the conclusion that the industry will never be the same again. But even if it does, it won’t happen anytime soon.
Currently, automakers face a common problem: low vehicle inventories caused by a global shortage of semiconductor chips. Prices rise due to high consumer demand and a shortage of affordable vehicles.
The reason is simple: consumers are willing to pay more for a new vehicle in pursuit of a new car. Dealers are happy to capitalize on this demand, inflating market prices. According to American data analytics and consumer intelligence company J.D. Power, 89% of new vehicles purchased were selling at or above MSRP. Whereas in December 2019, this figure was only 12%.
Industry leaders preparing for 2022
The company is ready to reduce 75-day or more vehicle deliveries to 50-day deliveries. To do so, Ford Motor CEO Jim Farley plans to move the company to an order-based system, instead of having customers buy cars from the dealers.
- Toyota Motor Corp is slowing production.
In January, the company announced that it would have to slow production at 12 factories in Japan due to an increase in COVID-19 cases among its employees and suppliers. In such a case, Toyota’s production plans for January may be cut by 47,000 vehicles, according to the company.
- General Motors expects production cuts.
Despite the company’s announcement of a $2.8 billion profit in the second quarter, after last year’s loss, General Motors still expects production cuts in the future. Production in North America is predicted to fall by about 100,000 vehicles in the second half of the year, while raw material costs are expected to rise by $1.5 billion to $2.0 billion.
What will happen to EVs
So far, electric vehicles and plug-in hybrids occupy a modest market share. It accounts for about 4% of all US industry. Over the next decade, however, analysts expect the market to grow rapidly.
- Tesla
Tesla is at the top of the list. At the end of 2020, the company became the world’s most valuable automaker by market capitalization. At the end of 2022, Tesla promises to release an updated version of the Tesla Cybertruck.
- Toyota Motor
In late 2021, Toyota Motor announced the construction of a new $1.29 billion EV battery plant in North Carolina.
- General Motors
As part of this strategy, more than 30 electric vehicles will be produced by the company by 2025. GM said its previously announced $35 billion investment between 2020 and 2025 will be primarily used to increase battery and electric vehicle production capacity.
- Pickup truck electrification
The R1T from Rivian Automotive and the GMC Hummer electric car were the first deliveries. Ford is also expected to release an electric version of the F-150 this spring.
- Increasing the number of startups
Since late 2020, four manufacturers have publicly entered the market: Lordstown Motors, Canoo, Electric Last Mile Solutions, and Faraday Future.
Conclusions
The automakers will continue to deal with the chip shortage and focus on EV development in 2022. For this to work, it is necessary to simplify supply chains and to create energy-efficient manufacturing
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