As the post-COVID recovery accelerates, the auto and mobility industry is on an upward trajectory, rebounding faster than expected after the massive shutdowns that began in March 2020. Sales in the United States have proven to be resilient, and most global OEMs say their vehicle production is now at 90% pre-COVID and growing levels.
However, challenges persist within the industry and the supply base is increasingly fragile. Ted Sylwestrzak of Dickinson Wright (Member, Detroit) recently moderated a panel presentation analyzing the current opportunities and headwinds in the automotive and mobility industry. The panel discussed a variety of topics, including chip shortages, commodity shortages, and the future of vehicle electrification.
Challenges facing the supply base
The automotive supply base is increasingly fragile due to economic challenges and the continued impacts of COVID which have led to inefficiencies, volatility and erosion of margins. Every OEM and supplier has been forced to take significant action during COVID shutdowns, and businesses are always adapting to the impact. Staff shortages have resulted in excessive overtime and high wages, while production disruptions caused by shortages of materials and components, such as microchips, steel, aluminum, resins and rubber , will most likely take the rest of the year to correct. In addition, the costs of transportation and resourcing activities abroad have increased.
But there is good news: Across the analysis of the automotive OEMs market, profitability levels appear poised to hold up in 2021 and even increase by 65% from 2020 levels. ‘by 2022.
Electrification is here to stay
Despite the challenges of the industry, one thing is certain: the path to vehicle electrification is coming sooner than anyone might have expected. Tesla’s success continues but faces competition from traditional OEMs, which have pledged more than $ 200 billion in electrification investments. Well-known nameplates such as GM, Humer, Ford Mustang Mach-E and F-150 Lightning have all joined the race for electrification, and VW launched its first all-electric vehicle in Europe in 2020. In North America, EV models are expected to approach 16% of total production by 2028.
However, America’s infrastructure has a long way to go to keep up with the pace of rapid change – Americans travel many miles and charging stations are scarce! But, there is no turning back the inevitable. The focus on funding the installation of charging stations, coupled with current studies of minerals and chips in electric vehicle batteries to build a new manufacturing infrastructure, will accelerate the electrification of vehicles as soon as possible.