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Fuel for Thought: A Rocky Recovery in the Second Year of the Pandemic

14 September 2021 Bjoern Huetter Kristen Balasia Mike Wall

Automotive Monthly Newsletter and Podcast
This month's theme: A Rocky Recovery in the Second Year of the Pandemic


The February 2021 edition of the monthly newsletter reviewed vehicle sales in the year 2020, the first year of the pandemic. With 2021-H1 results in, time to revisit the pace of the recovery and current electrification trends during this second year of the pandemic.

Looking at the heat map of the Global Auto Demand Tracker, sales volume is mostly "green", indicating recovery from the pandemic: First half (H1) 2021 sales for Greater China are up 31% year over year, North America is up 31%, Western Europe up by 30%.

Source: IHS Markit, © 2021 IHS Markit

Some roadblocks on the road to recovery remain however: In H1-2021, recovery could have been more pronounced if it was not for shocks on the supply side stemming from chip and raw material shortages. During H1, manufacturers' revenue and profitability improved versus prior year as the red arrows in the chart indicate:

Source: IHS Markit, © 2021 IHS Markit

OEMs such as Daimler, BMW and Audi confirm that observation in their latest quarterly earnings reports: revenue growth was "supported by higher sales as well as a positive mix and price effects" (Audi H1-2021 earnings). In other words: Given the product shortage, vehicle manufacturers are prioritizing orders for high-margin vehicles and dealers reducing discounts. Typically, used vehicles would be considered a viable alternative, specifically in the 0-1 year age bracket. But the lack of new product availability has already negatively affected that particular age bracket across a number of countries such as the United States and the European Big 5 (France, Germany, Spain, United Kingdom and Italy). Suppliers on the other hand are concerned about inflation and their inability to pass on hiking raw material prices, leading to a squeeze in profit margins.

Proliferation of Battery-Electric Only Brands

Currently, there are about 30 brands focused on battery-electric vehicles only. These comprise of established brands such as Tesla, challengers like NIO, Weltmeister Motors or XPeng Motors. Notably, none of the latter was mass-producing vehicles as little as four years ago. Other brands are BEV-subsidiaries of established manufacturers like Great Wall ("Ora") or Geely ("Geometry"). The proliferation of electric-only brands will continue with Lucid and Rivian entering mass-production shortly. Additional entrants like the technology company Xiaomi are yet to reach that state.

Source: IHS Markit, © 2021 IHS Markit

To keep abreast of the dynamic developments in the battery-electric domain, Global Auto Demand Tracker allows you to monitor the sales success of a new market entry, geographic spread, etc. For example, in H1-2021, about 10% (H1-2020: 6.5%) of global vehicle sales can be considered electrified, i.e. having a hybrid-, plug-in hybrid or battery-electric vehicles.

Inevitably, there will be consolidation of BEV companies which is all but a new phenomenon to the car industry: consolidation dates to the infancy of that industry itself. This time, the disruption to incumbent carmakers could in fact be tectonic, and a parallel can be drawn to the rise of low-cost airlines in the 1990s/ early 2000s when a bunch of airline startups began operations. Following a wave of consolidation, the remaining disruptors were thriving and continue to eat into the profit pools of incumbent airlines.

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Posted 14 September 2021 by Kristen Balasia, Vice President, Automotive Advisory, S&P Global Mobility and

Mike Wall, Executive Director, Automotive Analysis, S&P Global Mobility


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