After a rocky 2020 amid coronavirus woes, market experts predicted a somewhat smoother run for the auto industry in 2021, with the hope that automakers are better equipped to deal with the crisis, having chalked out new strategies to survive and thrive. But just when things seemed to be looking up for the auto market in early 2021, with sales recovering from coronavirus lows, the industry got mired in another set of problems. As we flip the calendar, let us look back at the key stories and trends of the U.S. auto sector in 2021 that grabbed headlines.
Chip Crisis Bites the Industry
While carmakers slammed brakes on chip orders in 2020 amid COVID-19-led sluggish demand, electronic manufacturers — which witnessed a significant demand uptick amid the pandemic situation — snapped up excess supply. Meanwhile, pent-up demand and preference for private transportation resulted in a faster-than-expected rebound of vehicle sales in early 2021. This resulted in a mounting shortage of semiconductors, which left the industry in disarray.
Various auto biggies including
General Motors
GM
and
Ford
F
battled the semiconductor supply deficit, which hindered their business operations and forced them to idle production lines across the world once again. At a time when automakers were concentrating on replenishing vehicle inventory, production cuts further dried up the same. This year, the global chip deficit played a major spoilsport, upending auto market growth. Such was the wrath caused by the chip famine that the global auto industry is expected to have lost $210 billion in revenues this year.
Inventory Challenges Mount
The auto industry is struggling with low inventory. While the demand for vehicles remained high through 2021, limited vehicle supply amid chip crunch and high prices owing to tight inventories kept a lid on sales volumes.
Retail inventories remained below 1 million units in November for the fourth straight month, per J.D. Power and LMC Automotive. This left many customers having a hard time finding new vehicles and specific models at dealerships. Also, with prices going through the roof owing to supply-demand mismatch, some customers were willing to pay a premium for their preferred vehicle. Another set of consumers was not willing to pay a heavy premium and instead waited on the sidelines amid limited choice and high prices.
Birth of Stellantis
The mega merger between Fiat Chrysler and PSA Group led to the creation of
Stellantis
STLA
in January 2021. The automaker began trading on the NYSE on Jan 19. The merger brought together several brands, including Fiat Chrysler, Alfa Romeo, RAM, Jeep and Maserati, along with PSA’s Peugeot, Citroen, Opel and Vauxhall. Headed by Fiat Chrysler’s John Elkann as the Chairman and PSA’s Carlos Taveres as the CEO, Stellantis is the world’s fourth-largest automaker in terms of volume.
Tesla’s Entry in the Elite $1T Club
Tesla
’s
TSLA
market cap hit $1 trillion in October, following the biggest-ever order from car rental giant Hertz. On Oct 25, Tesla’s valuation crossed $1 trillion for the first time. It became the fifth company in the history of the United States to be worth more than $1 trillion. This was a historic moment for Tesla as it marked the auto giant’s entry into the coveted club of the highly valued tech companies that rule the American markets. What made TSLA’s achievement all the more praiseworthy was that it was the first automaker to hit this milestone. Not surprisingly, Time Magazine recently named Tesla’s CEO Elon Musk as the “2021 Person of the Year”.
Dealership Merger Mania
A wave of consolidations swept across the auto retail industry in 2021. Big retailers flush with cash sought to scoop up smaller rivals in the hope that an increase in scale would help them lead digital transformation and boost competitive advantage. Dealership consulting firm Kerrigan Advisors predicted 350 total dealership transactions this year. This set a new record, making 2021 the biggest and most memorable year for auto dealership merger & acquisition activities in decades. More on 2021’s important M&A deals in the auto retail industry here:
Is 2021 Shaping Up to be Another Banner Year for Dealership M&As?
Rivian’s Blockbuster Market Debut
Electric-vehicle maker
Rivian Automotive
RIVN
was the hottest IPO to hit the markets in 2021 and the
fifth-biggest U.S. IPO of all time
. It went public on Nov 10, 2021 through a high-profile IPO, with shares spiking 29% on the first day of trading from its initial offering price of $78 per share. Rivian now has a market valuation of around $90 billion.
Importantly, Rivian started deliveries of its R1T pickup truck this September, beating other auto giants including Tesla, Ford and General Motors by being the first to bring an electric pick-up to the market. RIVN currently carries a Zacks Rank #3 (Hold). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
The Great EV Revolution
For years, it seemed that Tesla was the only automaker that was playing at the forefront of the EV phenomenon. But of late, things are changing as various big and small carmakers have started taking the concept of green vehicles seriously from a real-world functionality standpoint. In 2021, legacy automakers hit the gas on e-mobility push to gain a strong foothold in this red-hot space. General Motors
pulled out all the stops
to demonstrate its EV prowess. Close peer Ford also
went the extra mile
to take its EV game a notch higher.
Stellantis held EV Day on Jul 8, highlighting
ambitious e-mobility goals
to gain a strong footing in the red-hot EV landscape.
Japan auto giants also got serious to transition to all-electric transportation and making big electrification bets. For details, read:
Electric Dreams of NSANY, TM & HMC in the Spotlight
.
While automakers are all charged up, countries, states, and cities also stepped up their clean energy and e-mobility targets. California, New York, Japan, Canada, and the European Union laid out targets to phase out petrol and diesel cars by 2035.
With the broad-based transition toward environment-friendly vehicles in the United States, some of the world’s largest automakers dived into the business of producing batteries locally.
You may delve deeper with this writeup:
Auto Giants Bet on Battery Plants in 2021 for US Electric Future
.
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