The “2021” digits were pulled into Times Square by a Kia Sorento SUV last December after a cross-country road trip that began at the automaker’s US headquarters in Irvine, California, and has since traveled more than 5,500 miles with stops in 15 states.
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DETROIT – The auto industry may never be the same after 2021, a year notorious for bringing about major changes caused by supply chain problems and the coronavirus pandemic.
Supply chain issues – most notably, global semiconductor chip shortage – resulted in historically low vehicle inventories but also record prices and profits amid recovering consumer demand and a lack of available cars and trucks.
It’s a situation where some automotive executives like Ford Motor Chief Executive Officer Jim Farley has pledged to continue as long as the industry does not fall into crisis because of higher profit margins for automakers and dealers alike.
“This is a better way to run our business,” says Farley investors earlier this year. “We have the most complex marketing system I think on planet Earth. We can simplify all of that with a tighter inventory.”
Instead of delivering vehicles for 75 days or more, Ford is targeting deliveries within 50 days. To help manage this, Farley wants to move the company more towards an order-based system rather than customers buying cars from dealerships. It would help lower prices from the automaker and allow Ford to better manage its production, he said.
Lower vehicle inventory levels and higher prices this year are among the few changes that auto executives and analysts believe may never return to pre-2021 levels. related to electric vehicles, the supply chain and new competitors. Here’s additional information on those changes and more.
EVs
Are from Synthetic engine CEO Mary Barra describes this year as an “inflection point” Nearly all major automakers announced a shift to electric vehicles, which this year marks a significant change of tone for the auto and electric vehicle industry.
Much of that change is due to an increase in Tesla become the world’s most valuable automaker by market capitalization by the end of 2020 as a larger focus environmental, social and corporate governance.
A Rivian R1T electric pickup truck during the company’s IPO outside Nasdaq MarketSite in New York, on Wednesday, November 10, 2021.
Bing Guan | Bloomberg | beautiful pictures
While EVs, including plug-in hybrids, remain a niche market for about 4% of US industry, executives and experts expect a strong increase over the next decade.
Most notably, the electrification of pickup trucks begins with deliveries Rivian Automotive’s R1T in September and GMC Hummer EV in the first day of this month. This is followed by electric versions of the Ford F-150 – America’s best-selling vehicle for decades – in the spring and Tesla’s Cybertruck later next year.
SPAC
Electric vehicle companies going public through special purpose acquisitions, or SPACs, is a trend that started in late 2020 but accelerated in 2021.
From battery and charger suppliers like Solid power or ChargePoint for electric vehicle companies like Lucid’s groupSuch companies have changed the automotive landscape. While some don’t expect all companies to succeed, even one or two new companies could pressure legacy automakers to change their course, as Tesla did. prove.
Vehicle inventory
Factory shutdowns that started last spring due to the coronavirus pandemic and are happening now due to a global shortage of semiconductors have resulted in the number of new vehicles being available in the US. to hit record lows.
Keeping vehicle inventories lower is something the auto industry has done in the past but has never really been able to continue; in particular, automakers in Detroit often have the highest inventory levels.
Tyson Jominy, vice president of data and analytics at JD Power, believes that the longer the lower inventory levels last, “the more likely it is that these changes can be made permanent.”
Inventories of dealers across the country remain extremely low as a shortage of semiconductors leads to sporadic plant shutdowns and depleted vehicle inventories by 2021.
Michael Wayland / CNBC
“The challenge is it’s a fixed asset industry and we have a core history of going backwards and producing more because there is always the temptation to cheat, produce an extra unit for the sake of savings,” he said. cost”.
According to Cox Automotive, the auto industry had about 1 million new vehicles at dealerships in December, which is less than 1.8 million new cars for consumers to buy this year and 2.5 million fewer. compared to 2019. JD Power reports nationwide vehicle inventories at 850,000 vehicles this month, while retail sales are typically 1.4 million.
Price
Low supply has led to record dealer profits as consumers are willing to pay more for a new car. Some dealers are also adding price increases or “market adjustments” on high-demand products. While that’s not unheard of, the volume and scope are greater than ever, say analysts.
“People are going to make more money from it from here on out. I just don’t see it going back to pre-Covid levels,” Sonic Cars President Jeff Dyke told CNBC earlier this year, saying that “the whole ball game” has changed over the past year.
JD Power reports about 89% of new consumer-purchased vehicles sell for near or above the manufacturer’s suggested retail price, also known as the MSRP or sticker price. This compares to 12% in December 2019.
Cox Automotive reported the average list price of a new car last month was about $45,000, up from less than $40,000 a year earlier.
“I could argue that some of it could be permanent,” said Jeff Schuster, president of LMC Americas. “I don’t think prices will go back to pre-shortage levels or incentives will go up.”
Supply Chain
Shortages of chips and electric vehicles are causing automakers to rethink their supply chains and logistics, as companies try to insulate themselves from such a situation again.
Changes range from more vertically integrated component manufacturing to forming joint ventures or partnerships with EV chip and battery suppliers.
Toyota Motor earlier this month announced a new $1.29 billion battery plant for electric vehicles in North Carolina. It follows similar announcements by GM, Ford and others to move production of EV battery components closer to home to lower costs and reduce the risk of supply chain disruptions.
“As you’d expect, we’re committed to learning from this crisis to become a much stronger company,” Farley said earlier this year. “We’re taking this opportunity to improve our supply chain to eliminate vulnerabilities in the way.”
