As the industry recovers from pandemic shutdowns, every stakeholder is looking for their place going forward. We have learned so much and believe this new knowledge will alter the landscape. Many things will change, but some will not evolve in the ways that conventional thinking would have us believe.
In the history of the automotive industry, notable landmarks denote waves of changes. Packard’s H-pattern shifter, Cadillac’s self-starter, Ford’s moving assembly line, Oldsmobile’s Hydramatic transmission and DAF’s CVT all changed the industry for the better, leaving hundreds of other dead ends in their wake. The industry is in the early stages of another revolution that will accompany many industry-changing technologies and strategies alongside ambitious attempts that will not gain traction – and it will take years before the difference becomes obvious.
Near-term industrial shifts toward electric vehicles are changing the passenger car and light truck right now. Further down the road – a bit further than the industry believed just a few months ago – will be full autonomy. And even further out will be the shift to fuel cells or something even better. Being prepared for the certainties of change and the risks of what that change will be will separate the winners and losers, avoiding becoming a Tucker or a DeLorean as a footnote in history.
This story is an extract from the December 2022 issue of Auto Forecast Solutions’ monthly report. Auto Forecast Solutions is the only fully integrated solutions provider of vehicle, powertrain, drivetrain and electrification production forecasting, business planning software and advisory services to the global automotive industry. Click here to download the full report, or to catch up on previous months.
Economy
Global forces are building to generate questions about near-term economic conditions. Just as inflation around the world grew following the pandemic shutdowns, Russia’s invasion of Ukraine disrupted trade. Automakers building vehicles in Russia were immediately affected and that was compounded by sanctions against the country and any company doing business inside its borders. All of the major global automakers and suppliers inside Russia have backed away, reducing their income and dramatically affecting their assets as plants were sold or abandoned.
Ukraine played a key role in the global supply chain before the invasion. It provided wiring harnesses to automakers around the world, primarily in Eastern Europe, and the interruption of those supplies had companies scrambling for alternative sources of these important components. In the end, the disruption was temporary, but the resourcing of parts will make rebuilding Ukraine after the war tougher as automakers and suppliers will be even more leery of the region if Russia continues to covet the former Soviet republic.
In order to combat inflation, global central banks raised interest rates, stifling industrial growth. Money for investment had been virtually free for so long that markets had begun to take it for granted. In the past year, rates have soared, with the US Federal Funds Rate starting 2022 at 0.00-0.25% and ending the year at 4.25-4.50%, making borrowing far more expensive. These rates are expected to grow above 5% in 2023 as the Fed looks to get inflation under control.