Day one of the 10th annual TalkAuto event, hosted by J.D. Power and Canadian Black Book, opened with a global view around the disruption impacting the automotive industry.
Without a doubt, the semiconductor chip shortage continues to have real-world consequences on the industry and beyond, according to Jeff Schuster, President, Americas Operation and Global Vehicle Forecasts, LMC Automotive, who explored the topic of “Managing Auto’s Disruptive Recovery.”
“At the half-year point, things—and this is really before we saw a lot of the impact from chips—I think there was a feeling at least in the second quarter that this is going to be a relatively short-term duration of disruption. And we would get back to things in the second half of the year,” said Schuster during his presentation. “Obviously that didn’t happen. At the time, we were looking at a market that was up 28% globally.”
In looking at the global market, Schuster divided his findings of global sales growth across three different elements: the total vehicle market, the premium market, and the battery electric vehicle market. When considering the light vehicle percentage change in the first half of 2020 from the first half of 2021, the total light vehicle market was up 28% (a SAAR or 84.4 million units), 35% for the premium market, and the BEV market managed an “explosive growth” of 167%.
When considering the sales percentage year-to-date for the third quarter of 2021 from YTD Q3 of 2020, the light vehicle market jumped 12% (with a YTD SAAR of 82.3 million units), premium was up 17%, and BEV was up 139%.
“The explosive growth (for the BEV market) is really driven not only by Tesla’s strong performance—their expansion of capacity—but obviously the push from many of the global OEMs into the battery electric space, as well as some of the Chinese local OEMs,” said Schuster. “All in all, as seen from that strong growth, the selling rate globally was almost 84 and a half million units.”
In looking at the total light vehicle market and the third quarter through September, Schuster pointed to the deterioration of the growth rate—28% to 12%, with both light vehicle and premium markets essentially cut in half growth-wise, and BEVs down to under 140% growth.
“So from 2020 levels through the third quarter, again that deterioration that we’ve seen from the shortage of vehicles spills into the third quarter, and will continue through the fourth quarter from a selling rate standpoint,” said Schuster.
The 2021 global light vehicle production, when indexed against 2019, shows Q1 down 10%, Q2 down 15%, Q3 down 20%, and Q4 down 15%, for 2021 to reach a total of 75.4 million units.
The 2022 global light vehicle production, when indexed against 2019, shows Q1 down 14%, Q2 down 7%, Q3 down 2%, and Q4 down 3%, for 2022 to reach a total of 84.1 million units.
“From our December forecast, just to put some colour around it, we have cut essentially 12 million units out of this year and about 8 million out of next year to get to that 75.4 and the 84.1 million unit level,” said Schuster. “So again, a pretty pronounced deterioration in overall production levels.”
“All in all, as seen from that strong growth, the selling rate globally was almost 84 and a half million units.”
— Jeff Schuster, President, Americas Operation and Global Vehicle Forecasts, LMC Automotive
Through the third quarter, he said the global auto industry lost more than 6.9 million units, with another 3.3 million units expected before the end of the year. The semiconductor shortage accounts for approximately 90% of the disruption in 2021, followed by COVID-19, and then other issues like shortages of other materials and parts.
Most emerging markets are/will outperform mature markets in terms of CAGR global light vehicle sales for 2021-2015—with Brazil in the lead, followed by India, and a strong recovery in Western Europe.
On BEV growth specifically, Schuster said they did a “pretty strong” upgrade to their forecast and expects them to account for 40% of all vehicles sold by 2033.
“That account there equates to about 41 million units by then. And you can see it’s a pretty big shift up from where we were in the previous forecast—a little bit of a deterioration in the forecast in the near-term, mainly because of the disruptions through this year and next year, and again, a little bit of a slower growth rate in 2023,” said Schuster. “And then we will start to see a boost in growth from 2025 forward.”
As for Canadian-specific news, economic recovery appears to be delayed thanks to more intense vehicle supply disruptions and surging energy prices. Schuster calls it a muted recovery, from a GDP standpoint—much like around the world and in various markets, with Canada’s GDP sitting at around 4.8% (as anticipated for 2021), which is expected to dip a little bit into 2022. Some of the economic growth moves into 2022 and even into 2023.
However, supply issues and energy costs should ease up in the first half of 2022 and bring inflation closer to 2.5% by 2023. Inflation is expected to peak towards the end of the year, around 4.8%, or close to the 5% level, before declining. Schuster said it will take a while before it drops to 2.5%. But risks around prolonged supply disruptions, a resurgence in COVID cases (as we are seeing now), and overvalued housing and elevated debt remain a concern.
With all that in mind, it is worth noting that the Canadian market held up reasonably well and that although dealers are experiencing this disruption, it is not quite as much as Schuster would have expected.
