The news this week continued with coverage of Q4 earnings as well as the current widespread chip shortage. On the EV front, we are paying close attention to the recent ITC ruling of banning SK Innovation EV Batteries in the U.S. We also saw interesting stories out of the virtual NADA show and artificial intelligence in the automotive industry. Of course, there were some fun Super Bowl car ads over the weekend, many of which reflect current industry trends. There is much for us to discuss this week.
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 Katie Ramsburgh.

Hot Topics of 2/8/2021 - 2/12/2021

Chip Shortages

• How Covid led to a $60 billion global chip shortage for the auto industry
• GM CEO says chip shortage could hit profits by $2 billion
• GM extends shutdown at three plants due to chip shortage
• Nissan lowers sales forecast as CEO acknowledges disruption caused by chip shortage
• VW Mexico to adjust Jetta output until March 5 over semiconductors
• Honda and Nissan to sell a quarter of a million fewer cars because of chip shortage
• Mazda Forced To Cut Production By 34,000 Units
• No Quick Fix for Auto Chip Shortage

My thoughts:

This topic has dominated headlines the past few weeks and is expected to continue to make news for some time. Of course, the automakers will seek balance as best they can within their portfolios to be sure the big sellers and high-profit margin products have minimal impact. Still, this week we’ve seen the F-150 and a few others experience issues, which tells us that this problem isn’t getting better quickly. There are several forces at work causing the chip shortage problem. The bottom line is, there isn’t a quick fix. Many of the chips utilized in today’s products are somewhat outdated, and it’s unlikely the current suppliers will invest in more production. The race to modernize chips and incorporate new technology will keep engineers at the automakers working tirelessly.

Profits and Q4

• Toyota Profit Quickly Recovers Despite Chip Shortage
• GM Reports Strong 2020 Full-Year and Fourth-Quarter Results
• Honda raises full-year profit forecast helped by car sales rebound, cost cuts
• Fewer Miles Driven Hits Dealership Profits
• Ford posts surprise Q4 operating profit

My thoughts:

Q4 profit news was fabulous for the industry. Despite all the headwinds of 2020, customers were buying despite the limited stock. Automakers reduced costs in several areas due to remote work, lack of travel, and industry events. It will be interesting to see, once the pandemic ends, how much diligence will exist in the industry to keep these costs down. Some companies have publicly stated that travel and other balance sheet expenses will never rebound to the pre-pandemic levels. 

Of course, we need to watch the chip shortage issue closely and its impact on production. The shortage is likely to affect financial reports in 2021.

ITC EV Battery Ruling

• U.S. ITC rules against SK but allows temporary VW, Ford battery use
• UPDATE: SK Innovation EV Batteries Banned* For 10 Years By U.S. ITC
• Battery Trade Dispute Could Test Biden’s Green Policy Plans

My thoughts:

Overall, the battery trade dispute issue is unfortunate, but it isn’t the first time we’ve seen this in the industry. My gut says that SK will pay a licensing fee for this technology until they can remove this element in their designs. The industry needs the batteries, and there are limited sources for this product. The bigger issue is that there are limited sources, and those sources are not here in the US. The new administration has made several bold statements – now we need to dive into the details and make it happen!

NADA

• TIME and Ally Financial Name 2021 Dealer of the Year
• AutoNews Now: Incoming NADA chair Walser wants more minority dealers, enhanced relationships
• Starting at 16 in Minnesota Car Lot, Paul Walser Now Leads NADA

My thoughts:

Dealerships remain one area in the automotive industry that still has a lot of family legacy. I’m always amazed when I hear stories, such as these, about youngsters getting into the family business at a very early age. The business is in their blood. Unfortunately, mom and pop dealerships are being gobbled up by larger conglomerates. It’s becoming too difficult to compete without having the volume and breadth of product that the conglomerates have. This struggle isn’t likely to change as dealer margins continue to shrink. Compounding the problem, customers are embracing new buying options vs. going to the dealer. I believe this trend will continue.

A.I. in Automotive

• 5 auto industry AI trends for 2021 and beyond
• Baidu in talks to raise money for a stand-alone A.I. chip company
• Artificial intelligence for greater sustainability and quality of life in cities: GREENTECH FESTIVAL and Audi give GREEN FUTURE Award to Zencity
• Porsche created an AI to help you configure your perfect car
• Ai Build raises $1M to accelerate large-scale 3D printing in aerospace and automotive

My thoughts:

Future success in the automotive industry will depend on “customer experience.” AI has a large role to play in the user experience of the future. Brands that get the experience right will survive – those that don’t - will not. It’s not only about the AI in the product. AI needs to be utilized in the manufacturing process to improve quality and efficiency as well. Partnering with other companies, such as the Ford Google deal, makes a lot of sense to help ensure customers want to buy your brand, as the car is like their “personal valet.”

Super Bowl Commercials

• Here's how Ad Age rated the Super Bowl auto ads
• Super Bowl commercial roundup: Watch all of the car-themed ads here
• Springsteen, Jeep try to unite America with healing Super Bowl ad
• A Super Bowl Ad That the Biden Presidency Made Possible
• Why so many auto brands are sitting out the Super Bowl

My thoughts:

I’m a sports geek and a Tom Brady fan (Michigan grad) for those of you who don't know. I enjoyed watching the game as much as the commercials this year. The automotive commercials morphed this year to commercials that spoke of social equity, more electrification, and less about large engines and performance. I saw a lot less macho and a lot more “let’s care about each other and the world.”  I must admit that my favorite was the Norway commercial (I’m a Will Ferrell fan too). But it’s been more fun to watch the rebuttals since that commercial aired. The automotive industry is a ton of fun – who knew??

Best Regards,

Carla Bailo
President and CEO
Center for Automotive Research

Upcoming webinar series:

Battery Enclosure Design for Electric Vehicles

Thursday, February 11, 18, & 25, 2021  |  1:00 PM EST

In this three-part webinar series, experts will present battery enclosure designs using steel, aluminum, and polymer composites. The webinars will allow the audience to understand different design ideas for EV battery enclosures and have a live interaction with the experts. CAR will facilitate the discussion. Below is the agenda:

• Thursday, February 11, 1:00 PM: Aluminum Battery Enclosure Design. Guest Speaker: Dr. Andreas Afseth, Technical Director, Constellium  |  Watch Recording
• Thursday, February 18, 1:00 PM: Polymer Composite Battery Enclosure Design. Guest Speaker: Dr. Ian Swentek, Senior Application Development Engineer, Hexion
• Thursday, February 25, 1:00 PM: Steel Battery Enclosure Design. Guest Speaker: Mr. Ram Iyer, Manager Automotive Product Applications, ArcelorMittal