Chip shortages and inflation plague the auto industry

The automotive MMI (monthly metal index) fell 6.32% last month, a downward trend it has maintained since May. The decline comes despite valiant efforts to put out some of the fires plaguing the auto industry. But with microchip shortages, soaring inflation, and supply and demand issues, the auto market can’t seem to get a break.

JD Power Quality study puts ‘premium vehicles’ to the test

In such a tight auto market, the industry doesn’t need bad press. Unfortunately, that’s exactly what happened when market research firm JD Power released its latest report last weekend. The 2022 US Initial Quality Study (IQS) has taken the time to highlight the issues currently plaguing the industry. However, they also called automakers “premium” for their extended quality issues.

What bad? Apparently, this turned out to be the highest number of reported vehicle problems in the study’s 36-year history. In fact, JD Power recorded an 11% increase in “problems per 100 vehicles” compared to 2021. The report also indicates that vehicle quality has declined in all areas since the pandemic, more expensive models had more quality issues than more affordable cars.

Much of this has to do with cars having so many more “bells and whistles”. After all, many of these high-end features require increasingly rare components. You may remember hearing how BMW is now offering its heated seat feature on a subscription basis. Although this is not becoming the norm, it shows a symptom of a very big problem.

According to JD Power’s Director of Global Automotive, David Amodeo, “Automakers continue to introduce increasingly technologically complex vehicles at a time when there have been many shortages of critical components to support them. “. He also added that “given the challenges automakers and their dealerships have faced over the past year, it’s somewhat surprising that initial quality hasn’t dropped even more dramatically.”

Automotive experts are at a loss

This weekend, Automotive News published a article detailing the difficulty of predicting the automotive industry. The crux of the argument being that there are so many problems at work that analysts cannot account for all the different variables.

It’s rare for analysts to back down and say, “we just don’t know,” but it’s not completely unheard of. That said, that doesn’t necessarily mean we can stop listening to the experts. In fact, it might be a good idea to think of this as a “call for attention”. That is, investors who previously only followed one or two forecasting sites would do well to get a second, third, and fourth opinion.

Related: China and Saudi Arabia step up energy cooperation with critical deal

Fortunately, numbers are numbers. For instance, LMC Automotive found that sales of new light-duty vehicles in the United States (NLV) were only 6.78 million from January to June. However, the National Auto Dealers Association found that NLV sales for July actually had increase 2.5%. This is good news, of course. However, it is important to remember that these numbers are still down 8.9% from 2021.

And while these numbers are all factual, they don’t paint as clear a picture as they would in a normal market. Until some of these mitigating factors are mitigated, it will be difficult for investors and buyers to find solid footing in the auto industry.

UK experts feel they are behind the electric car manufacturing curve

A recent editorial in The Guardian gave voice to many UK residents who feel their government is not taking action to meet the demand for electric vehicles. It is true that the country has a lot to do. Their Prime Minister, Boris Johnson, recently resignedinflation recently clocked to 9.4% and the cost of living has skyrocketed.

But there are also other concerns. For example, the UK produces a wide range of automobiles including Jaguars, Minis and Land Rovers. The UK has also seen a huge increase in demand for electric vehicles. However, many feel that the UK has fallen behind other European countries. This is not only in terms of the production of electric vehicles, but also in terms of the production of components.

Electric vehicle batteries contain lithium, cobalt and nickel, supplies that are difficult to source, especially now. And while the rest of Europe is currently building some 35 Gigafactories, the UK has one so far. To make matters worse, little action has been taken on behalf of manufacturers to get things done.

Jaguar/Land Rover, for example, has expressed interest in moving its electric vehicle production to Slovakia. Meanwhile, a proposed gigafactory in Coventry has been under discussion for months. And although Sunderland’s current factory could expand in the future, experts believe the country will need at least six more factories to meet future demand.

In short: the country is not where it needs to be, and there is no plan in place to get there. Although they certainly have “bigger fish to fry” right now. The UK cannot ignore its automotive market.

By AG Metal Miner

More reading on Oilprice.com:

Leave a Comment

Your email address will not be published.