Shortage of chips, declining income, electrification and jobs

Granted, here on the dashboard we’ve posted a lot about the torrent of issues facing the auto industry. Sales in China are down. Supply chains continue to be a general mess of delays. Factories continue to operate at reduced capacity (at best it seems). And so on.

Industry news has not improved. The most recent reports now predict that chip shortage will last until 2023. Of course, keep in mind that as electrification increases, the need for chips increases. Revenues are down across the industry. GM’s third quarter profit fell 41% year over year. Volkswagen was also broken down. Stellantis too: turnover down 14%. Without inventory, with declining sales, with buyers with nothing to buy, not only are OEMs down, but their suppliers are of course down as well (it would be hard not to be).

The lack of vehicles has an unsurprising impact on used car sales: they are also stressed by the lack of stocks. If people can’t buy new vehicles, they can’t trade in old vehicles. And, they may very well buy used instead of new because of what might be available. In the past 18 months, used car prices have increased by 40%. The prices continue to rise. A forecast does not predict the used car market to normalize until “Well in 2022”.

In other news, the shift to electrification is moving forward. But for the current workforce, this is disturbing news (as it is in many industries in transition). Electric vehicles have fewer moving parts and are arguably simpler to assemble, requiring fewer workers. Report already shows more than 70,000 job losses for OEMs alone. Add suppliers at each level and one can easily calculate a very large number of job cuts. While this will no doubt help the industry to cut costs and increase profits, it will leave dozens of people around the world without work.

There are, of course, new jobs as well. But they require new and different skills which are not necessarily easy to acquire. In Alabama alone, there are currently thousands of auto industry jobs waiting to be filled.. This is consistent with other industries, as workers continue to choose from the myriad of positions available.

Add to these challenges: who is ready for an aluminum shortage? Multiple reports now indicate magnesium will be hard to find in 2022. At the very least, it will lead to an increase in the price of materials. Such increases regularly cascading down prices all the way to the showroom.

Whatever the perspective, the auto industry, like many industries, continues to face difficult times in a changing landscape around the world.

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About Bob C. Zoller

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