What is Happening with Automotive Industry?
Drivetrain of many countries, one of the biggest world economy drivers is in danger of imploding. Automotive industry is not economical as it used to be, car manufacturers and even suppliers are registering big losses, lay of people and even close their factories. EV sales dropped as high as 25% in some countries, dealership lots are overfilled with unsold cars as buyers are hesitant.
The automotive industry, once defined by combustion engines and traditional manufacturing processes, is undergoing a profound transformation. As we move further into the 21st century, the landscape of transportation is shifting towards sustainability, connectivity, and autonomy. However, this evolution hasn’t been without its challenges. In recent times, we’ve witnessed fluctuations in EV sales and an unsettling trend of layoffs and production reductions by automotive manufacturers.
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The Rise of Electric Vehicles (EVs)
The rise of electric vehicles marked a significant paradigm shift in the automotive industry. EVs promised a cleaner, greener alternative to traditional internal combustion engine vehicles, addressing concerns over environmental sustainability and reducing dependency on fossil fuels. In recent years, governments worldwide have incentivized the adoption of EVs through subsidies, tax credits, and stringent emissions regulations. Major automakers have responded by investing heavily in electric vehicle technologies, rolling out innovative models with improved range and performance. After years of “new technology” push and hyped sales dwindle, Automotive manufacturers are in deep trouble due to unsustainable EV paradigm shift.
Chief Financial Officer John Lawler said in a briefing back in October, 2023, that following competitor General Motors’ (GM.N) decision to postpone a $4 billion electric truck facility in Michigan, Ford is growing increasingly concerned about the cooling market for EVs. Citing “tremendous downward pressure” on pricing, Lawler restated Ford’s decision to postpone a portion of its planned multibillion-dollar investment in additional EV and battery manufacturing capacity.
Compared to its estimated $32,350 loss per EV in the second quarter, Ford lost an estimated $36,000 on each of the 36,000 electric vehicles it supplied to dealers during the quarter.
Chief Executive Officer Jim Farley stated during Ford’s July second-quarter results conference that the firm will reduce the pace at which it ramps up the production of financially disastrous EVs. Instead, he aims to reallocate investment to Ford’s commercial vehicle segment and triple sales of gas-electric hybrids over the next five years.
Shifting production towards plug in hybrids sounded great back in October, yet newest 2024 numbers show a big slow down of plugin sales as well. Ford cut back on the number of F-150 Lightnings it was producing, and its dealers are furious about having to part with the duds. General Motors cut its sales forecasts for its completely electric vehicles. Volvo stopped sponsoring Polestar, its Chinese electric vehicle joint venture. Renault, a French carmaker, cancelled its competitor’s IPO and blamed the market.
Continental AG, a German car supplier, declared on Wednesday that it will remove 7,150 positions globally by the year 2025. In a statement, the organization announced that 1,750 research and development positions will be eliminated, 380 of which were at software subsidiary Elektrobit. As part of a previously stated cost-cutting effort intended to save the firm 400 million euros by 2025, the company will also eliminate some 5,400 positions. The proposal was disclosed in November by Continental, which now employs about 200,000 people globally, without disclosing the precise number of layoffs.
Used Car Sales
Prior to the pandemic, used automobile values reached all-time highs; however, they are declining for months. For those searching for reasonably priced cars, the trend is a welcome relief, but some current car owners who purchased their vehicles at peak prices with huge auto loans may find it problematic. Canadian Black Book (CBB), an automotive analytics business, reports that as of the end of September, the average listing price of a used passenger car was around $37,000, which is comparable to values observed in 2020. This is a decrease of almost 14% from the average price of roughly $43,400 in 2022.
If people decide to default on large loans for cars that are worth little in comparison to the outstanding sums, the sharp decline in used car values might increase auto loan delinquencies.
The drop is noteworthy because prices dropped by -0.66% the week in November of 2023, compared to -0.27% on average for the same week in 2017–2019. Prices in the vehicle and truck/SUV segments decreased by -0.89% and 1.33%, respectively. The values of every category decreased throughout weeks compared.
New Car Sales and Price Predictions
In a couple of months, the US auto market has entered a lower gear. Even though average automobile prices were just at record highs this past summer, some analysts now believe that an excess of cars on the market will cause a pricing war that drives down costs. 2024 may see those price reductions, and manufacturers are gearing up for a pricing battle. Prices for certain electric car manufacturers have already been cut. According to the experts, price reductions are likely to hurt manufacturers of family automobiles the most, while luxury automakers should do better. The combination of rising energy prices and high pricing that push many consumers out of reach might be very detrimental to EV producers.
Perhaps the price drops in used and new cars are due to consumers not being confident with their finances and their financial future. Bad job market, rising job losses and rising costs of living is proving to be economy downward spiral. Now that cars don’t get sold and consumer confidence is very low, will we see a new paradigm shift towards some better car technologies? How about continuing with Hydrogen Vehicles?
