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Five ways 2021 may have forever changed the auto industry

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After a crossing-country trip that began at Irvine’s U.S. Headquarters in California and ended in Los Angeles, the Kia Sorento SUV towed the “2021” numbers into Times Square in December. It covered over 5,500 miles, with stops in 15 different states.

Kia

DETROIT – The automotive industry may never be the same after 2021, an infamous year that brought massive changes sparked by supply chain issues and the coronavirus pandemic.

The supply chain issues – most notably, a global shortage of semiconductor chips – led to historically low vehicle inventories but also record pricing and profits amid resilient consumer demand and the lack of available cars and trucks.

Some auto executives, such as Ford MotorBecause of its higher margins, Jim Farley, CEO of Automaker and its dealers has promised to keep going even when it isn’t in crisis.

Farley said, “This way is better to run our company.” investors earlier this year. “We have the most difficult go-to-market process I can think of on Earth.” All of this could be simplified with smaller inventories.

Ford plans to have a supply of 50 vehicles per day, instead of 75 days or more. Farley hopes to change the system to allow customers to buy vehicles directly from dealers, instead of ordering them through an order-based process. Ford will be able to manage its production better and receive lower prices from Ford, Farley stated.

Analysts and automotive executives believe that prices and vehicle inventories will drop this year and may not return to levels of 2021. Others include electric vehicles and supply chains, as well as new competitors. These changes are discussed in more detail.

EVs

Starting at General MotorsMary Barra CEO, describes the year in this way an “inflection point”This year was marked by a shift in tone and tone, with almost all the major automakers declaring a pivot towards electric vehicles.

The rise of the internet was a major driver of much of this change. TeslaTo be the most valuable automaker in terms of market capital by 2020. as a greater focusYou can find out more about corporate, environmental and social governance.

Rivian R1T, an electric pickup truck that was used during the company’s IPO, outside of New York’s Nasdaq MarketSite. Wednesday, November 10, 20,21.

Getty Images| Bloomberg | Getty Images

Experts and executives expect a rapid increase in EVs over the next decade, even though they are still a small market, at 4% of U.S. industries.

Most importantly, pickups were electrified with the first deliveries of the Rivian Automotive’sR1T September, and 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.

SPACs

The trend of electric vehicle companies becoming public via special purpose acquisition corporations (or SPACs) was established in the late 2020’s but has been accelerated since 2021.

These suppliers are battery- and charging providers Solid PowerOder ChargePointTo EV companies like Lucid GroupThese companies have dramatically changed the landscape of automotive. Even though not everyone expects all the companies to be successful, one or two of these new companies can exert pressure on existing automakers to alter their course, as Tesla proved.

Stock of vehicle inventories

Due to an acute pandemic of coronavirus, factory shut downs last spring and now because there is a shortage of semiconductor chips worldwide have reduced the availability of vehicles in the United States. to reach record lows.

Automotive industry is familiar with the concept of keeping a lower vehicle inventory. However, it has not been successful in the long-term.

Tyson Jominy (Vice President Data and Analytics at J.D. Power believes that the lower inventories are the more likely to be permanent.

Due to the shortage of semiconductor chips, dealer inventory across the nation remains extremely low. This has resulted in sporadic plant shut downs and depleted car inventories by 2021.

Michael Wayland/CNBC

He stated that the industry is a fixed-asset sector and there is a history of backsliding. The temptation to produce more, cheat or make more units because of cost efficiency is a constant threat.

Cox Automotive reported that the industry was home to approximately 1 million vehicles. That’s 1.8m fewer vehicles this year than 2019 and 2.5m less than in 2019. J.D. J.D. Power says that the national vehicle inventories have reached 850,000 units this month. Retail sales average 1.4million.

Prices

As consumers will pay more to buy a vehicle, the low supply has led to record profits for dealers. High-demand vehicles are seeing dealers add markups or market adjustments. Analysts agree that this practice isn’t unusual, but it has a greater scope than ever.

Everyone will be able to earn a lot more from this point forward. “I don’t think it will go back to pre-Covid levels.” Sonic AutomotiveCNBC interviewed President Jeff Dyke earlier this year to discuss how “the whole game” has evolved in the last year.

J.D. According to J.D.Power, 89% consumers bought new vehicles at or close to the suggested retail price of the manufacturer. Also known as MSRP (sticker price), it is reported that about 89% sold for or just above this price. Compare this to December 2019, which was 12%.

Cox Automotive has reported that last month’s average vehicle list price was approximately $45,000. This is an increase of less than $40,000 in a previous year.

Jeff Schuster is the president of LMC Americas. He stated that “I would likely argue that some of it could be permanent.” I don’t believe pricing will return to levels pre-shortage or that incentives will increase.

The supply chain

Automakers have to revise their supply chain and logistics in order to avoid a similar situation again due to the shortage of chips and electric cars.

This includes more vertically-integrated parts production, as well as joint ventures and partnerships with suppliers of EV batteries and chips.

Toyota MotorAn earlier announcement this month made it clear that a $1.29 Billion battery plant was being built in North Carolina for electrified cars. Similar announcements were made by Ford, GM, and Ford earlier this month to increase the production of EV components within North Carolina to decrease costs and minimize supply chain disruptions.

“As you would expect, we’re committed to learn from this crisis to be a much stronger company,” Farley said earlier this year. We’re using this chance to improve our supply chain and eliminate any potential vulnerabilities.

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