The ‘2021’ numbers were towed to Times Square last December in a Kia Sorento SUV after a cross-country ride that began at the automaker’s US headquarters in Irvine, California and traveled more than 5,500 miles, with stops in 15 states.
DETROIT – The auto industry may never be the same after 2021, an infamous year that brought huge changes fueled by supply chain problems and the coronavirus pandemic.
Supply chain problems – most notably a global shortage of semiconductor chips – have led to historically low vehicle inventories, but also led to record prices and profits amid sustained consumer demand and a shortage of affordable cars and trucks.
This is a situation in which some auto executives, such as Ford Motor CEO Jim Farley, have pledged to continue when the industry is not in crisis due to higher margins for the automaker as well as its dealers.
“This is the best way to do our business,” Farley told investors earlier this year. “I think we have the most sophisticated go-to-market system on planet Earth. We could simplify all of this with tighter inventories. ”
Instead of a 75-day or more delivery of vehicles, Ford plans to deliver a 50-day delivery. To deal with this, Farley wants to move the company to an order-based system instead of customers buying cars from dealerships. It will help reduce the automaker’s discounts and allow Ford to better manage its production, he said.
Lower vehicle inventory levels and higher prices this year are some of the few changes that auto executives and analysts say will never return to pre-2021 levels. Other changes have affected electric vehicles, supply chains and new competitors. Here’s more information on these and more.
From General Motors CEO Mary Barra, describing this year as a “watershed moment” for nearly all major automakers announcing the move to electric vehicles, this year has seen a significant shift in the tone of the auto and electric vehicle industry.
Much of these changes were driven by Tesla becoming the world’s most respected automaker by market capitalization at the end of 2020, as well as placing more emphasis on environmental, social and corporate governance.
A Rivian R1T electric pickup truck during the company’s IPO outside the Nasdaq MarketSite in New York, Wednesday, November 10, 2021.
Bing Guan | Bloomberg | Getty Images
While electric vehicles, including plug-in hybrids, remain a niche market at around 4% of the US industry, executives and experts expect aggressive growth over the next decade.
Specifically, pickup truck electrification began with deliveries of the R1T from Rivian Automotive in September and the GMC Hummer EV earlier this month. It is expected to be followed in the spring by an electric version of the Ford F-150, America’s best-selling car for decades, and by the end of next year by the Tesla Cybertruck.
Publication of EV companies through Special Purpose Acquisition Companies, or SPACs, was a trend that started in late 2020 but accelerated in 2021.
From battery and charger suppliers such as Solid Power or ChargePoint for electric vehicles like the Lucid Group, such companies have changed the automotive landscape. While some do not expect all companies to succeed, even one or two new companies can pressure older automakers to change direction, as Tesla has proven.
The factory closures, which began last spring due to the coronavirus pandemic and are now happening due to a global shortage of semiconductor chips, have resulted in a number of new cars available in the United States. to hit record lows.
Saving fewer vehicles is something the auto industry has played with in the past, but has never been able to continue to work; in particular, Detroit’s automakers, which typically have one of the highest inventory levels.
Tyson Jominy, vice president of data and analytics at JD Power, said the longer inventory declines continue, “the more likely it is that these changes can be made permanent.”
Dealer inventory levels across the country remain extremely low due to a shortage of semiconductor chips, leading to sporadic plant shutdowns and depletion of vehicle stocks in 2021.
Michael Wayland / CNBC
“The problem is that this is a fixed assets industry and we have a basic history of retreating and producing more because there is always the temptation to cheat, to produce another unit because of cost efficiency,” he said.
The auto industry had about 1 million new vehicles at dealerships in December, according to Cox Automotive, 1.8 million fewer new cars available for consumers to buy this year and 2.5 million fewer than in 2019. … JD Power reports that national vehicle stocks are 850,000 vehicles this month, while retail sales are typically 1.4 million.
Low supplies have led to record dealer profits as consumers are willing to pay more for a new car. Some dealers also add markups or “market adjustments” to high-demand items. Analysts say this is not unprecedented, but the volume and scope is greater than ever before.
“From now on, everyone will be making a lot more money because of this. I just don’t think it will go back to pre-Covid levels. ” Sonic Automotive President Jeff Dyck told CNBC earlier this year, saying that “the whole game” has changed over the past year.
JD Power reports 89% of new vehicles sold by consumers that are selling at a price close to or above the manufacturer’s suggested retail price, also known as the manufacturer’s suggested retail price or special price. For comparison, in December 2019 this figure was 12%.
Cox Automotive reports that the average list price for a new car last month was about $ 45,000, up from less than $ 40,000 a year earlier.
“I would probably argue that some of them might be permanent,” said Jeff Schuster, president of LMC America. “I don’t think prices will return to pre-deficit levels or incentives will increase.”
Chip shortages and electric vehicles are forcing automakers to rethink their logistics and supply chains as companies try to protect themselves from a repeat of this situation.
The changes range from more vertical integration of parts manufacturing to joint ventures or partnerships with battery and chip suppliers for electric vehicles.
Earlier this month, Toyota Motor announced the construction of a new battery plant for electrified vehicles in North Carolina. It follows similar announcements from GM, Ford and others to move battery component manufacturing for electric vehicles closer to home to lower costs and reduce the risks of supply chain disruptions.
“As you would expect, we intend to learn from this crisis to become a much stronger company,” Farley said earlier this year. “We are taking this opportunity to update our supply chain to address future vulnerabilities.”