Current Trends in the Automotive & Mobility Industry
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As post-COVID recovery accelerates, the automotive and mobility industry has been on an upward trajectory, rebounding faster than expected from the extensive shutdowns that began in March 2020. US sales have proven resilient, and most worldwide OEMs report their vehicle production is now 90% pre-COVID levels and growing.
Challenges, however, within the industry persist, and the supply base is increasingly fragile. Dickinson Wright’s Ted Sylwestrzak (Member, Detroit) recently moderated a panel presentation analyzing the current opportunities and headwinds in the automotive and mobility industry. The panel discussed various topics, including chip shortages, commodity shortages, and the future of vehicle electrification.
Challenges Facing The Supply Base
The auto supply base is increasingly fragile due to economic challenges and continued COVID impacts that have led to inefficiencies, volatility, and margin erosion. Every OEM and supplier was forced to take significant actions during the COVID shutdowns, and companies are still adjusting from the impact. Staffing shortages have resulted in excessive overtime and high wages, while production disruptions caused by material and component shortages, such as microchips, steel, aluminum, resins, and rubber, will most likely take the rest of the year to amend. Additionally, transportation costs and on-shoring resourcing activity have increased.
But there is good news: across the entire automotive supplier market analysis, profitability levels appear poised to hold in 2021 and even expand to 65% higher than 2020 levels by 2022.
Electrification Is Here to Stay
Despite industry challenges, one thing is certain – the path to vehicle electrification is coming sooner than anyone could have anticipated. Tesla’s success continues but faces competition from traditional OEMs, who have pledged over $200 billion in investments towards electrification. Well-known nameplates such as GM, Humer, Ford Mustang Mach-E, and F-150 Lightning have all joined the race to electrification, and VW launched its first all-electric vehicle in Europe in 2020. In North America, EV models are projected to approach 16% of total production by 2028.
However, US infrastructure has a ways to go to keep pace with the rapid changes – Americans drive a lot of miles, and charging stations are few and far between! But, there is no turning back from the inevitable. An emphasis on funding the installation of charging stations, coupled with current studies of EV battery minerals and microchips to build new manufacturing infrastructure, will accelerate vehicle electrification sooner rather than later.
For more information, contact Ted Sylwestrzak at Tsylwestrzak@dickinson-wright.com.
Challenges, however, within the industry persist, and the supply base is increasingly fragile. Dickinson Wright’s Ted Sylwestrzak (Member, Detroit) recently moderated a panel presentation analyzing the current opportunities and headwinds in the automotive and mobility industry. The panel discussed various topics, including chip shortages, commodity shortages, and the future of vehicle electrification.
Challenges Facing The Supply Base
The auto supply base is increasingly fragile due to economic challenges and continued COVID impacts that have led to inefficiencies, volatility, and margin erosion. Every OEM and supplier was forced to take significant actions during the COVID shutdowns, and companies are still adjusting from the impact. Staffing shortages have resulted in excessive overtime and high wages, while production disruptions caused by material and component shortages, such as microchips, steel, aluminum, resins, and rubber, will most likely take the rest of the year to amend. Additionally, transportation costs and on-shoring resourcing activity have increased.
But there is good news: across the entire automotive supplier market analysis, profitability levels appear poised to hold in 2021 and even expand to 65% higher than 2020 levels by 2022.
Electrification Is Here to Stay
Despite industry challenges, one thing is certain – the path to vehicle electrification is coming sooner than anyone could have anticipated. Tesla’s success continues but faces competition from traditional OEMs, who have pledged over $200 billion in investments towards electrification. Well-known nameplates such as GM, Humer, Ford Mustang Mach-E, and F-150 Lightning have all joined the race to electrification, and VW launched its first all-electric vehicle in Europe in 2020. In North America, EV models are projected to approach 16% of total production by 2028.
However, US infrastructure has a ways to go to keep pace with the rapid changes – Americans drive a lot of miles, and charging stations are few and far between! But, there is no turning back from the inevitable. An emphasis on funding the installation of charging stations, coupled with current studies of EV battery minerals and microchips to build new manufacturing infrastructure, will accelerate vehicle electrification sooner rather than later.
For more information, contact Ted Sylwestrzak at Tsylwestrzak@dickinson-wright.com.
