Five ways 2021 may have forever changed the auto industry

Five ways 2021 may have forever changed the auto industry

The “2021” numerals have been towed into Instances Sq. final December by the Kia Sorento SUV after a cross-country road-trip that began on the automaker’s U.S. headquarters in Irvine, California, and coated greater than 5,500 miles with stops in 15 states.


DETROIT – The automotive trade could by no means be the identical after 2021, an notorious 12 months that introduced large adjustments sparked by provide chain points and the coronavirus pandemic.

The provision chain points – most notably, a world scarcity of semiconductor chips – led to traditionally low car inventories but in addition document pricing and income amid resilient client demand and the shortage of obtainable vehicles and vans.

It is a scenario that some auto executives equivalent to Ford Motor CEO Jim Farley have pledged to proceed when the trade will not be in a time of disaster due to the upper margins for the automaker in addition to its sellers.

“This can be a higher technique to run our enterprise,” Farley advised traders earlier this 12 months. “We now have essentially the most difficult go-to-market system I feel on planet Earth. We may simplify all of that with tighter inventories.”

As an alternative of a 75-day or extra provide of autos, Ford is concentrating on a 50 days’ provide. To assist handle this, Farley needs to maneuver the corporate extra to an order-based system as an alternative of shoppers shopping for autos off a vendor lot. It’s going to assist decrease reductions from the automaker and permit Ford to higher handle its manufacturing, he mentioned.

The decrease car stock ranges and better costs this 12 months are amongst a handful of adjustments that automotive executives and analysts consider could by no means return to pre-2021 ranges. Different adjustments concerned electrical autos, provide chains and new rivals. Here is further data on these adjustments and extra.


A Rivian R1T electric pickup truck during the company’s IPO outside the Nasdaq MarketSite in New York, on Wednesday, Nov. 10, 2021.

Bing Guan | Bloomberg | Getty Images

While EVs, including plug-in hybrids, remain a niche market at about 4% of the U.S. industry, executives and experts expect an aggressive ramp-up over the next decade.

Most notably, the electrification of pickups began with deliveries of the Rivian Automotive’s R1T in September and the GMC Hummer EV earlier this month. They are expected to be followed by an electric version of the Ford F-150 – America’s best-selling vehicle for decades – in the spring and Tesla’s Cybertruck late next year.


Vehicle inventories

Dealer inventory levels across the country remain extremely low due to a semiconductor chip shortage that has led to sporadic plant shutdowns and depleted vehicle inventories in 2021.

Michael Wayland / CNBC

“The challenge is it’s a fixed asset industry and we have a core history of backsliding and producing more because the temptation is always there to cheat, produce one more unit because of the cost efficiencies,” he said.

The auto industry had about 1 million new vehicles on dealer lots in December, which was 1.8 million fewer new vehicles available for consumers to buy this year and 2.5 million less than 2019, according to Cox Automotive. J.D. Power reports national vehicle inventories are at 850,000 vehicles this month, when retail sales are typically 1.4 million.


Supply chains

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