From semiconductor shortages to management shake-ups, the ongoing decline of sedan sales to the surge in EV demand, 2021 was a busy year for the auto industry. Indeed, one could argue that the industry saw some of the most dramatic changes in more than a century.
Certainly things didn’t follow a predictable path. As the year began, it looked like new car sales would continue to struggle under the weight of the COVID pandemic. Instead, demand surged to near-record levels – until automakers began running short of the critical semiconductor chips needed in every modern vehicle.
And, even though Wall Street had shown a soft spot for Tesla, who would have expected it to end the year with a market cap of more than $1 trillion – or that start-up Rivian would be valued by investors at nearly $10 billion, more than either General Motors or Ford?
Here’s a look back at the 11 biggest stories of 2021 that we’ve covered on TheDetroitBureau.com.
Between a chip and a hard place
Today’s cars are computers on wheels, with microprocessors operating everything from powertrains to infotainment systems. Unfortunately, automakers cut back orders too sharply when the pandemic hit. When car sales rebounded they couldn’t get nearly enough semiconductor chips, resulting in repeated factory closures that will have cost the industry about 7.7 million vehicles of production and $210 billion in revenues, according to a September report by AlixPartners. There are signs that the situation may be easing but spot shortages could stretch well into 2022. (Paul A. Eisenstein)
New and used car prices soar to record levels
Courtesy of the semiconductor shortage, dealer inventories are now running at record lows. At the same time, the strong economy has had people looking to buy vehicles. The high demand met low supply and prices skyrocketed, seemingly setting a new record every month for average transaction prices — what people actually pay for a new vehicle. It now stands at more than $45,000, about $8,000 more than a year ago. Of course, when you can’t find the new car you want, a late model version is an option. But even there, used car prices have surged to record highs: more than $27,000 on average. (Michael Strong)
The year of the EV, Part Uh!
Doubters only have to look at 2021 to see how American motorists are finally plugging into EVs. Demand for pure electric models doubled during the first half of the year and continued climbing as more and more new products came to market. TheDetroitBureau.com reports, the number of long-range models has doubled since late 2020 – and should quadruple over the course of 2022. Whether sales will hit the long-range targets industry planners and regulators have set, however, likely will depend on help from Washington setting up EV chargers and boosting sales incentives. (Paul A. Eisenstein)
Battery-electric vehicles still cost more than gas-powered models, and that appears to be one of the reasons why many manufacturers are focusing on the luxury and performance sectors. Of the various BEVs it’s developing, Mercedes-Benz launched sales in the U.S. with the EQS, its all-electric S-Class alternative. It helps that electric motors can deliver incredible levels of tire-spinning torque – and horsepower numbers hardly imaginable just a few years ago. One version of the new Lucid Air punches out over 1,100 horsepower – for a starting price of $160,000. (Paul A. Eisenstein)
Tesla defies the odds – for now
Tesla survived technical, legal and money problems to become the world’s top seller of electric vehicles. The Model Y and Model 3 outselling the next 11 BEVs combined by 200%. With charismatic and controversial CEO Elon Musk in control, Tesla’s now the world’s most valuable automaker nearly three times over, with a market cap of $1 trillion. The EV maker is opening two more plants in Berlin and Texas that could further accelerate sales. However, 50 new BEVs will debut before Tesla rolls out its next new vehicle, the Cybertruck, causing some to wonder how long its dominance will last. (Michael Strong)
Toyota plots its own course
As the world’s automakers reveal their intentions to be fully electric within anywhere from 5-15 years, Toyota remains an outlier. CEO Akio Toyota believes that battery electric vehicles are too expensive – and threaten both automotive industry jobs and profits. Additionally, he feels there simply is not enough electricity to go around and the cost to boost infrastructure will be far too costly. So even though Toyota has belatedly shown a line of future EVs; hybrids and plug-in hybrids are expected to remain the dominant part of the company’s electrification plans, at least through 2030. (Larry Printz)
Biden aims to move the needle for EVs
The Biden Administration’s new fuel economy rules reverse the cuts enacted under former President Donald Trump. The final target, equal to around 40 miles per gallon, is slightly tougher than what the White House first announced in August. The administration also released details about its plan to create a nationwide network of 500,000 EV charging stations. Another key goal, boosting EV sales incentives to $12,500, is stalled in Congress as part of Biden’s Build Back Better plan. It could be critical to meeting his 2030 target of having EVs make up 40-50% of U.S. sales. (Joe Szczesny and Paul A. Eisenstein)
Start-ups muscle in
There are plenty of other EV start-ups looking to duplicate Tesla’s success. And a number of them have been using a novel approach to raise critical capital: the SPAC, or special purpose acquisition companies. At the close of business on Tuesday, Rivian was worth $92.9 billion, at least according to Wall Street. That’s nearly $10 billion more than what the stock market values Ford or GM. But not everything has gone smoothly. Several EV entries have been accused of misleading investors, Nikola this month agreeing to pay $125 million to settle an SEC probe. (Paul A. Eisenstein)
Merger creates world’s 4th-largest automaker, Stellantis
The radical changes reshaping the industry clearly played a role in the merger of Fiat Chrysler and France’s PSA Group. The newly formed Stellantis instantly became the world’s fourth-largest automaker with a major presence across Europe as well as North and Latin America. The merger and subsequent reorganization are carried out without the plant closings and layoffs long a feature of a changing automotive landscapes. The new company expects to report a profit for its full year of operations but it still faces plenty of challenges, among other things amping up its push in electrification. (Joe Szczesny)
Autonomous vehicles struggle to stay on track
For those who believe self-driving vehicles are the way of the future, the good news is that Germany this month gave Mercedes-Benz permission to introduce Drive Pilot, what would be the first true Level 3 autonomous vehicle technology. And GM is promising to bring its Level 3 Ultra Cruise system to market by 2023. But there have been plenty of setbacks, too. Most notably, NHTSA is conducting a probe of Tesla’s Autopilot in the wake of several dozen crashes. Even so, Tesla CEO Elon Musk continues promising a true self-driving version will soon be released – which he’s now said for years. (Larry Printz)
Car buyers shift online
EV startups like Tesla have changed the face of automotive retailing. Among other things, they’re pioneering direct sales to consumers through online portals. Thanks to the pandemic, traditional automakers have been forced to catch up, making it easier than ever for shoppers to handle some or all of the transaction online. Even though it was possible for at least a decade or more, dealers have been the prime driver of the trend as showroom traffic dried up, bringing cars to customers when showrooms weren’t open. Tapping into the trend, OEMs are now establishing their own sales portals. (Larry Printz)