Electric vehicles took the spotlight in the auto industry this week as President Biden signed a record number of executive actions during his first week in office. While chip shortages still plague the auto supply chain, we saw some good news on the recovery front in some Q4 earnings.
If you missed my previous Hot Topics email, you can read it here.

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Hot Topics of 1/25/2021 - 1/29/2021

Biden and EV Push

• Biden plans to replace government fleet with electric vehicles
• Biden Just Hit The Brakes On Trump's Clean Car Rollback. Now It’s Time To Accelerate Toward All-Electric Vehicles
• GM pledges to be carbon neutral by 2040 with zero tailpipe emission vehicles by 2035
• Has the electric car’s moment arrived at last?
• Electric Car Charging Service EVgo Going Public As Biden Readies Clean Vehicle Push
• Biden's car shopping list may be too picky
• What effect will Joe Biden’s “Buy American” order have?

My thoughts:

President Biden has certainly been busy since his inauguration with more executive orders than any previous president in U.S. history. Beyond the above announcements, there has been significant discussion by both Pete Buttigieg and Jennifer Granholm about their intentions regarding clean transportation and reduction of the U.S. carbon footprint. These discussions bode well and are in line with announcements from the global automakers.

However, it needs to be done with eyes wide open to unintended consequences. The U.S. has a significant number of jobs related to internal combustion engines and the oil and gas industry. Further, many components and raw materials for the car electrification industry are not sourced or manufactured locally. Both sourcing and employment supply chains need to be incorporated into the timing for this conversion to electricity and clean energy. I’m a huge supporter of all of this, but we need to think about all tentacles of this octopus.

Batteries

• U.S. Is Losing the Battery Race Despite Having the Right Stuff
• Stellantis, Tesla among automakers to receive European aid for battery innovation
• YSU partners with DOE on $1M project

My thoughts:

As I mentioned previously, the U.S. must start to produce our own supply chains and raw materials for the electrical components needed for the automotive industry. This production will mean new mining initiatives and more battery production here in the U.S.  Education and reskilling of the workforce is key to making this happen. We need to think about incentives to allow this work to happen. Companies that are currently pumping oil need to consider hydrogen pipelines and resourcing of geologists from shale oil to cobalt and other materials.

Chip Shortages

• Taiwan ministry says TSMC will prioritize auto chips if possible
• Germany urges Taiwan to help ease auto chip shortage
• Severe shortage of crucial supplies risks becoming recurring crisis for auto industry
• A global computer chip shortage could mean $61 billion in lost sales for automakers
• Tight chip supplies could persist for as long as a decade
• TSMC ramps up auto chip production as carmakers wrestle with shortages

My thoughts:

This chip shortage cannot be ignored in terms of the shift to more electrification and “smart devices” in our lives.  Computers are in nearly everything being manufactured in our “smart homes.” The automotive industry is much more cost-sensitive due to low-profit margins than some of the companies who need chips as well. It starts with the silicon supply and expands from there. Again, it is vital to consider more robust supply chains and producing more of these products locally. 

Q4 Earnings

• Turning coronavirus corner, Volkswagen's profit falls less than feared
• LG Chem swings to Q4 operating profit, predicts gains in 2021
• Audi Ended 2020 On A Massive High
• Luxury cars, EVs to fuel Hyundai's China, US sales in 2021; Q4 profit jumps
• US light vehicle sales improve in Q4
• Autoliv Q4 operating profit up 34% as production recovers from pandemic blow
• Tesla sheds $66 billion in market value after 4th-quarter earnings fall short of forecasts

My thoughts:

I can’t begin to explain my delight to see these profits for the automotive industry. With all the advanced development that needs large dollars, current vehicles need to produce the profit to fund this. Further, it identifies that companies have severely cut costs, and a fair amount of this will not return to typical spending levels. Companies have discovered that remote work and less travel significantly reduce expenses, but not efficiency. They will not revert back in the future.

BUT, consumers are those most impacted by the pandemic, and the price of cars continues to increase. Those buying cars are a finite population. Unless the economy recovers quickly, there is some risk to disposable income and large purchases as we continue through the pandemic without a clear vaccine route for all.

My final thought on this -  be cautious as an industry. Continue to be vigilant on expenses and inventory and spend on those new products with clear ROI. This isn't anything all the industry CEOs don't know well, and I trust that cautious optimism rules the day in all boardrooms these days.

Best Regards,

Carla Bailo
President and CEO
Center for Automotive Research