Expectations for the automotive market in 2022
Car sales began to gradually increase early last year as the economy recovered from the first year of the pandemic but have started to decline again since the summer of 2021. As a result, the baseline forecast for new car sales in Europe in 2022 is also not optimistic.
It is stated in the report of the Eurostat analytical agency. Interestingly, the exact figures are not given, as the spread in the forecasts is vast. The optimistic forecast of the agency for the next year suggests a 5% increase in the car market, and the pessimistic one – a fall of 14%. The realization of one or another scenario will depend on how long the deficit of electronics for cars will last. The pandemic didn’t just affect the auto industry. For example, the field of Blackjack India has also changed, but in contrast to the automobile industry – good ones.
The most likely predictions are:
- Increase in the price of cars;
- Less auto production;
- Increased production of electric vehicles.
Impact of the pandemic
The coronavirus pandemic, which erupts at different times around the world, will affect the market by making it difficult to synchronize automotive supply chains. In addition, how long the skyrocketing car prices will continue is a factor that also plays a significant role. This situation, combined with inflation, could deplete the population’s purchasing power.
The passenger car segment and the light commercial vehicle (LCV) segment have different sales dynamics in Europe. According to the Association of European Businesses, car sales were down 18.1 percent at the end of last year compared with the end of 2020. However, thanks to solid sales in the first half of last year, the LCV market increased 10.5%.
A key driver of automotive market dynamics in 2021 was the shortage of electronic components. Sales rose at the beginning of the year as the economy recovered from the first year of the pandemic but began to decline again in the summer as car factories were unable to meet demand due to chip shortages. At the same time, prices rose.
Average Price
According to various statistics, the average price of a new car increased by 17% last year. Worst of all, the upward trend in prices is predicted to continue amid a shortage of new cars. Thomas Sterzel, head of AEB, noted that the auto industry still has a long way to go to overcome the global decline in production and new logistical problems associated with disruptions in the supply chain.
Today, the dynamics of the auto market are driven by the availability of commercial vehicles, as demand now exceeds supply. With the projected situation in 2022, the auto shortage is not expected to improve anytime soon, so Scherzel predicts that the market will repeat last year’s result by the end of the year. Still, the auto industry will be in the red by November. It is not expected to move until the end of the year. The industry is still experiencing a genuine shortage of semiconductors, and it is not yet clear when things will get back to normal.
According to many industry experts, we should not expect the shortage problem to be solved quickly because production planning is usually postponed several months ahead. Therefore, it can be predicted that the supply situation will not change significantly in the next 7-8 months.
It is also expected that the price of new cars will increase by another 5% on average in the next few months. The worst-case scenario for new LCV models is a 1% increase in 2022. The optimistic version of market development even assumes sales growth of only 5%. However, this does not apply to cars, which will continue to rise in price, and at the same time, there will be a shortage, which will lead to a continuing decline in sales.
Microchip shortage
The shortage of microchips for cars global automakers will feel after 2022, analysts of consulting company Roland Berger said. So they conducted a study, “How to overcome the semiconductor crisis. Sustained Structural Disruption Requires a Strategic Response from the Automotive Industry.”
According to the paper, demand for microchips will only grow, and the gap between it and production capacity will reach 11%. Expansion of production of electronic components should not be expected shortly either: according to the company’s analysts, semiconductor manufacturing plants are already operating at an average capacity of 97%.
Regardless of what kind of cars a manufacturer puts on the market: electric vehicles, hybrids, or conventional internal combustion engines, microchips are used in all nodes – in engine start systems, driver assistance, navigation, and multimedia. Modern cars are equipped with many sensors, and they are all controlled by microprocessors. The more expensive the car, the more chips are used in its assembly. The shortage of semiconductors has confronted all the automakers around the world. The deficit of chips has forced some companies to take extreme measures. For example, Mercedes stopped production of C-class sedans in spring 2021 to use scarce scraps to assemble, first of all, premium class models.
According to the Boston Consulting Group, in 2021, the world will produce 7-9 million fewer cars than previously planned.
The main reasons for the chip shortage were the COVID epidemic and subsequent lockouts, and an increase in demand for electronic devices in general. It is unknown when the balance between supply and demand will be restored. Some experts suggest that it will happen no earlier than the second half of 2022.
The shortage of microprocessors has led to significant losses in the automotive sector: this year, they amounted to at least $110 billion in estimated revenue. In Q2 2021 reporting, many automotive companies lowered their annual revenue projections. The supply disruptions have affected the entire industry. Volkswagen AG, for example, reduced its full-year forecast, noting that shortages of supply affected the whole industry, both mass-market and luxury segments. BMW AG, for its part, said it would deliver 90,000 fewer cars this year than previously planned.
Cars will only get more expensive
It is believed that the rise in car prices will be 10-15% next year. It is due not only to the lack of components but also to the fact that metal has become more expensive and that every year the essential equipment of cars is becoming more and more filled out. Therefore the cost is also becoming higher.
In the content, you will find more predictions about auto and other areas.
Sales
The auto industry will end in 2021 with nearly 79.4 million passenger cars sold. Accordingly, global sales for 2021 will increase by only 2.9%, compared to the level achieved in 2020.
The European auto industry is set for a harsh mid-winter. Growing concerns about viruses are coupled with ongoing supply chain problems and manufacturing problems in Germany. As a result, West and Central Europe’s demand forecast for 2021 assumes 13.9 million units, a 0.2 percent increase over 2020. According to IHS Markit, by 2022, demand is forecast at 15.0 million units (+ 7.8%).
Problem Solution
Automakers suffering from a shortage of microchips and forced to close factories to the detriment of production are improving. But the problem is not yet solved: the rapid transition of the automotive industry to electric cars may further aggravate the situation. The number of semiconductors in electric vehicles is twice as high as in cars with internal combustion engines.
It will take months or even years for chip manufacturers to ramp up production and build new plants. And that requires billions of dollars of investment. Meanwhile, no one has canceled the pandemic yet. So we should not hope for a reduction in car prices and a normalization of the semiconductor market yet.