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HOT CAR Topics From CAR(la)



Carla Bailo
President and CEO
Center for Automotive Research

The chip shortage was a big news item this week as we saw the Senate's approval of $76B in semiconductor subsidies and automaker announcements of Q2 earnings, with some automakers more impacted by the chip shortage and supply chain woes than others. We also review significant investments and loans in the EV battery space as industry stakeholders continue to make headways in the EV revolution.  

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

We would love to hear from you and welcome your questions at any time. If you're interested in sharing your thoughts with us on hot topics, or if you would like to ask us a research question, please reach out to Sara Bozer.

The team at CAR is looking forward to seeing many of you at the CAR Management Briefing Seminars next week in Traverse City, Michigan. While our room block at the Grand Traverse resort is full, we welcome Hot Topics readers to join us online for two-and-a-half days of rich automotive content that highlights current challenges faced by the industry. Secure your virtual registration with access to all session live streams at MBS HERE>>>

Hot Topics of 7/25/2022 - 7/29/2022

Chip Shortage

My thoughts:

As we saw in the June sales results and the quarterly earnings reports, the chip shortage continues to plague our industry. As such, CAR and many other groups applaud the passing of the "CHIPS Act." Personally, I want to thank all those in the legislature who worked tirelessly to make this happen.

Now, this won't cause the semiconductor shortage to disappear overnight, and several caveats go along with receiving the money to establish facilities here in the US, but this is undoubtedly a huge step in the right direction. Further, the funds allocated for research are vital for the US to retain leadership in this critical element of nearly all devices manufactured today and our defense products.

As we'll discuss at the CAR MBS session next week, the semiconductor industry is seeing softening demand for chips for personal devices, helping the automotive sector recover. Many automakers predict that their year-end guidance will be maintained with the 2nd half recovery. Some are more optimistic than others, but all are on this path. Many other issues may change this prediction, so CAR will follow this closely.

More on this to come next week at CAR MBS 2022, as CAR Affiliate SEMI will take the main stage to discuss: "Shaping the Future of the Auto and Chip Supply Chains – A Call for Collaboration." Get access to this panel live stream and more by securing your virtual registration HERE>>>


Q2 Earnings and Outlook

My thoughts:

As I mentioned above, nearly all the automakers are facing headwinds in terms of supply for the customers. However, there is now the added burden of increasing material costs, wages, and the impact of inflation on disposable income. So, although the automakers are still hauling in sizable revenues, we see their bottom line profit decrease with a few exceptions, such as Stellantis. In light of these headwinds, several automakers are now pulling out cost-cutting measures, including headcount reductions and more.

Our economy isn't friendly for robust sales, and we see this throughout the consumer goods arena. Big names such as Walmart are decreasing their year-end financial outlook as we see the bottom 2 quartiles of wage earners pulling back on spending. In auto, we still have the high wage earners buying cars, but even they are considering their spending with Wall Street in such a flux. We must be cautious and watchful of our customers and never be complacent – the economy and our customer base are getting nervous.

I invite all Hot Topics readers to join us and other industry experts online for CAR MBS 2022 as we discuss the 2023 automotive outlook and critical factors affecting automotive sales and production forecasts. Register HERE>>>


EV Battery Loans and Investments

My thoughts:

Much more to come on this over the next few days as we see the final outcome of the Inflation Reduction Act. The Act will likely include incentives for purchases of products with XX% US content.

Depending on these figures, the investment in battery and EV manufacturing plants may become even more significant. There will likely be more investment announcements, as even with those mentioned above and previously, we don't have enough battery capacity to meet the 50% by 2030 goal. More investment and support are needed to make that happen.

CAR Board Member and auto industry veteran John Bozzella will be leading a discussion with other industry experts at MBS next week on "The Path to 50% – How are We Doing a Year Later?". Register to view this session and more online HERE