Hot Topics From C.A.R. 11/1/2021 - 11/5/2021

Carla Bailo, President and CEO, Center for Automotive Research

Q3 earnings were announced the first week of November and took the spotlight as many industry stakeholders still battle with ongoing supply chain disruptions. There was also some news in the cybersecurity space, which continues to be a topic of concern with both vehicle safety and consumer data in mind. We are also monitoring announcements regarding EV infrastructure and trade and tariffs.

As the microchip crisis continues to plague the automotive industry and beyond, we have migrated all news updates related to the shortage to our website. You can stay informed on the automotive impact of the global chip shortage by visiting here.

If you missed my previous Hot Topics email, you can read it here.

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Hot Topics of 11/1/2021 - 11/5/2021

Q3 Earnings GM beats Wall Street’s third-quarter estimates, guides toward ‘high end’ of 2021 earnings forecast Ford shatters Wall Street’s earnings expectations, raises guidance for the year on new vehicle demand Stellantis confirms 2021 margin target despite Q3 drop in sales VW Q3 profit falls 12% on chip shortage Jaguar Land Rover records $413 million quarterly loss on chip shortage My thoughts: Although we saw a profit reduction, this wasn’t unexpected, considering the issues facing the automotive world, including parts shortages, supply chain difficulties, and workforce concerns.  However, full-year guidance is critical as it indicates that some of the short supplies are expected to begin to recover rather rapidly. Recovery rates will vary automaker by automaker, and you can rest assured that high-profit models will be the first to receive the missing parts and get shipped out to dealers. Recovery is also good on the customer side…MAYBE. If companies stick to their word regarding keeping inventory in check, typical incentives will remain a thing of the past. However, it is easy to slip back into old habits when the crisis is over. It remains to be seen which companies will hold true to what they are saying about keeping inventory in check. Those companies that do remain true are on the path to sustainability and resilience, in my view. It might be a good time to re-evaluate which models should switch to a build-to-order model and which should be shipped to the dealer lots. Clear customer understanding is needed to think about this in a new way – perhaps car purchasing isn’t one size fits all?? A shift in the purchasing process could lead to the highest profit levels seen by a hybrid approach. Cybersecurity Federal Trade Commission Updates Cybersecurity “Safeguards Rule” for Financial Institutions Dealers assessing potential cost of tougher federal Safeguards Rule Workers sent home after ransomware attack on major automotive parts manufacturer How cyberattacks disrupt the auto supply chain Protecting Cars from Security Threats More Critical Than Ever SwRI develops new system to improve connected vehicle cybersecurity My thoughts: Cyber-attacks are the new “cold war” weapons. You may think I’m being extreme, but this is something every company and every individual must take very seriously. You may feel that your company is small potatoes, and nobody will want to attack you. Well, this isn’t true – companies of all sizes are being attacked, as well as government institutions. Cyber training for your company is critical and must be continuously updated and continuously checked/tested. Just one person with one click can start a catastrophe. You need vigilant systems and human capital to be always on guard and notify when and if attacked. The sooner an attack is found, the sooner it can be remedied.  The question isn’t whether my company will be attacked, but when/how will my company be attacked, and do I have systems in place to discover the attack and isolate it fast? This threat also means that we need human capital in the world of cyber -  more white hat folks, as we have enough black hat folks out there. I recommend you get some of the black hat folks on board to test your systems and find the holes. Training is continuous and vital to the health of your company – large or small. EV Infrastructure and Workforce Coalition urges Michigan to invest $600M for EV infrastructure, workforce training GM will work with dealers to install 40,000 EV charging stations across North America US charging infrastructure is outpacing forecasts, study finds First Tesla Superchargers for other automakers begin service, higher fees and membership offered China claims title of having world’s largest EV charging network Energy secretary defends tax credits for EVs made by unionized automakers My thoughts: As the automakers make significant investments in EVs, they are growing nervous about having all the levers in place to influence a customer to select an EV for their lifestyle. These levers include charging stations and networks. Investment in these levers is crucial to making EV strategy successful.  Customers are increasingly frustrated by finding a charging station only to discover it has the wrong outlet or is “out of order.” It is good to invest and install charging infrastructure, but maintenance is critical.  And, it is good to see workforce training for this equipment high on the list – training is sorely needed. The tax credit situation is a hot button issue these days. I won’t say which is wrong or right, but the bottom line is, building batteries and EVs in the United States is a good thing for our economy. All auto companies, regardless of whether they are union represented, employ significant numbers of Americans. All Americans need a place at the table in the future. Trade and Tariffs US, E.U. end Trump-era tariff war over steel and aluminum Canada says proposed U.S. E.V. tax credit could violate trade deal Mexico to seek expert panel to fix auto dispute with U.S., report says Progress on China tariffs slow but still ‘a good start' My thoughts: We need to tread carefully with trade and tariffs as the U.S. still has a significant trade imbalance with several countries. We need to align better with our allies to reach a fair deal. We’ve had the Trump administration with the “stick” method, and now we need to find a blend of “carrot and stick.” The sustainability and resilience of our economy relies on managing these issues properly.

Best Regards, Carla Bailo President and CEO Center for Automotive Research     Search, Explore, and Discover!