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CAR | Let's Discuss This Week's Hot Topics

Michigan Business Network
November 23, 2021 5:00 PM

cars

Finance took center stage in the news this week as discussion continued surrounding 'Whackflation' and the latest automotive stock numbers. President Biden made news as he aims to advance the U.S. ahead of its competitors globally. And finally, we are also monitoring announcements regarding vaccine mandates.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.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 11/15/2021 - 11/19/2021

'Whackflation'

My thoughts:

I’m sure we’ve all felt the sting of inflation in our pocketbooks or digital wallets. From vehicles to gasoline to food to services, the cost for each of these has increased. Wages are rising but not nearly at the same pace. The good news is that many consumers are still buying with savings from COVID, as most people didn’t travel, eat out, or spend on other goods and services, which left them with more disposable income and more savings than in recent history. BUT, consumer confidence is starting to fall, so how long can the continued “buy” pace continue? Prices continue to rise as consumer goods continue to be hit with wage inflation and supply chain cost increases – these costs can only be consumed so much before being be passed on to the consumer. Whack-a-mole with rising costs eventually hits the end game when too many moles are upright. We need to proceed very carefully and balance our budget, which means there will be a lot of debate on the build back better plans…it’s going to be a rollercoaster for a bit! And economists are having difficulty forecasting with all this up and down – read below for more from the CAR team on this topic.Thoughts from CAR’s Senior Vice President of Research, Kristin Dziczek:Pandemic-induced supply chain disruptions are causing 30-year inflation highs, but the higher prices are inconsistent, which created a new term “whackflation”—where there are shortages and high costs of some products and a glut of product and low prices of others. While supply disruptions continue, there is an upside to the current inflationary prices: U.S. consumer demand remains very strong—stronger than companies would have anticipated as the world tipped into the pandemic recession. Wages have been rising, but not as fast as prices (average wages actually ticked downward in October), and employment has not recovered to pre-pandemic levels yet. Demand is supported, in part, due to the government economic interventions—both fiscal stimulus and monetary policy. The Federal Reserve Board of Governors (“the Fed”) targets 2 percent inflation as their long-term goal as part of the dual mandate of balancing prices and full employment. At its November meeting, the Fed signaled that they still see the current inflation as “transitory.” But with many forecasters seeing continued high prices throughout 2022, the Fed may back off its stimulus measures (bond-buying and low-interest rates) faster than initially planned. As with nearly everything in modern life these days, our economic future will be determined in large part by the path COVID-19 takes in the months ahead.

Automotive Stocks

My thoughts:

If you listened to the CAR podcast this week, we talked about the “WHOA” moments that recently happened. First, Lucid Air won Motor Trend Car of the Year (selling very few and with no track record), and Rivian’s valuation/IPO shares! Both were quite shocking to those of us who have been in the business for many years. Mary Barra is totally right when she stated GM is so undervalued, but let’s add any “legacy” automaker to that list. The “legacy” automakers are pouring dollars not seen before into electrification and are launching vehicles regularly, BUT their value doesn’t budge much. Sure, Ford stock has doubled, but it remains under $20. GM is a far cry from Rivian, Tesla, and Lucid, even at the top of the list.The “legacy” automakers are hindered because they made big promises and underdelivered for so many years. These broken promises created a hangover of doubt that will take time to correct. Also, “legacy” automakers need to stay the course on not only EV production but keeping inventory at the proper levels, watching incentives, and more as COVID ebbs. When times are great, it is easy to slip back into bad habits, and it has happened repeatedly – the analysts need to be proven wrong this time. Then, it “might” be possible to heal the hangover.

Global EV Competition

My thoughts:

China is eating the world in batteries, raw materials and refining, and EV’s – period. The rest of the world has a lot of catch-up to do. If the U.S. really wants to catch up, there are several things needed to make this happen:

  1. Research dollars – we need to do the battery research at our institutions and keep that talent here in the US.
  2. Battery raw materials – we need to reopen or start mines and refineries and do so with safe and environmentally sound facilities. This work takes time and money but will reduce our dependence on critical materials from outside the U.S.
  3. Battery manufacturing – we need a lot more capacity to reach the 50% EV by 2030. We need incentives for companies to open manufacturing sites here.
  4. Talent – we need everything from skilled labor to PhDs in battery research. We need to take a deep dive into what is needed for the future, what our academic institutions currently provide, and fill that gap. Jobs at the highest risk due to the death of ICEs should be first on the list for training and then go forward from there.
  5. EV manufacturing – Again, we are a long way from being able to self-supply 50% EV sales by 2030. Incentives for manufacturers to move to our shores are needed (and workforce)!

This necessary development is not just a government problem, an industry problem, or an academic problem.  Let’s stop expecting “someone” to fix this and realize it will take all 3 – the Triple Helix of government, industry, and academia working together to make all of the above happen. We need to work as “1 USA” to become the leader in EV’s.

Vaccine Mandates

My thoughts:

Honestly, I’m so tired of COVID, and I don’t think I’m alone here. Personally, I don’t understand the anti-vaxxers, although members of my family fit this category. Vaccines are a tough topic with many repercussions if we don’t manage the issue properly. Today, we require vaccinations for children to enter school unless they have an exemption of some kind. This requirement includes DPT and MMR, with several other vaccinations recommended. Should COVID be added to this list – should the yearly flu shot be added – should the shingles vaccine be added….and the list goes on.My basic instinct is to trust that people will “do the right thing,” and if they choose to not be vaccinated, they will wear a mask, keep their distance, and do every other protocol required to keep those around them safe. Unfortunately, this has morphed from a medical issue into a political issue and caused extreme tensions and distrust. How can we move forward from this point? Is it by mandating vaccines? We’ve all seen hospital workers being forced out of their jobs due to their decision not to vaccinate – these are the people who have worked tirelessly on the front lines taking care of us during the early days of COVID. Is this right?I wish I had the answer….can we all just do the right thing and abolish COVID?? Please??

Bailo-2 (2)Best Regards,Carla BailoPresident and CEOCenter for Automotive Research

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  • Center For Automotive Research

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