Today’s article looks at the issues faced by the automotive industry. It has been a difficult time for the automotive industry. After a significant decline in sales in the automotive industry, there were high hopes for 2020, which states the industry will embark on recovery.
However, due to the pandemic, there has been a drop in sales in 2022. Here we have a large picture of what investors have in mind for the industry.
Shortage in Semiconductors across the Globe
As our economy finally recovered from the downturn of the pandemic, investors started to believe in a high-scale recovery in the whole market at the start of 2021. However, the industry forecasters began to take down every quarter of light vehicle productions each year. The reason was a lack of investment in producing automotive chips, other ongoing issues and other production problems created by COVID-19, and more demand in production.
What Happened in 2022?
Going into 2022, the actual shortage and the real demand for more semiconductors created a significant boost in investment made by chip suppliers. Hence, investors are confident they will obtain more online supply in the upcoming years. However, there is a dip in raw material prices in the next quarter, so even when there is COVID-19, the production capacity can also go up.
Risk of Downside
For instance, Ukraine is now at war, and it was one of the leading suppliers for the production of neon gas as well as copper wiring harnesses. Russia and Ukraine used to be the top steel exporters as well, and Russia is producing the world’s 40% of the globe’s palladium.
Although many commodities are off the war-induced highs, it is not as simple to say everything went fine.
The reality is that many automobile companies base their whole year outlook on the assumption that there is an increase in the second half of the semiconductors, but the price spike is not expected.
The Main Impacts
As another immediate impact, Ford and General Motors also stated that there had been production halts on the supply chain problems since the conflict started in Ukraine.
Europeans will feel the majority of the actual impact in 2022 in Europe, and there will also be a 1.7 million cut. Still, North America will also see a forecast of a 480k drop in production expectations.
For Autoliv, it is not just the whole issue of handling a down-cut in car production; the business also has a lot of sub-suppliers in Ukraine and will face a lot of pressure from raw material prices that continue to increase.
Many things point to automobile firms taking down the full-year guidance when they finally let go of first-quarter reports in the new season.
Is It the Right Time to Buy?
Investors’ interest turns into speculation about whether the prices are fixed or not? There isn’t more clarity until they finally end the conflict. Moreover, the guidance cuts mean a significant level of uncertainty around larger issues. Reassessing the situation before buying after the Ukraine war would be better.