INTRODUCTION

Welcome to issue number 12 of the Just Auto magazine

Mixed fortunes in prospect for 2022

The year just gone was something of a mixed bag. On the plus side, underlying demand for vehicles came back after the unprecedented shock that was 2020. There’s more uplift to come in 2022 as demand for vehicles responds to higher economic activity and Covid-19 vaccines ease the pandemic crisis.

However, we have been through a tumultuous year as pandemic recovery came with several serious complications. The recovery from the public health crisis itself was uneven across the world and there were negative knock-on impacts that could not have been foreseen. In particular, the recovering automotive sector suffered a shortage of critical electronic components when demand picked up as semiconductor suppliers struggled to meet a surge in orders from automotive companies.

As the electronics content of vehicles has soared with advanced technologies and features over the past decade, so has demand for ‘chips’. The auto industry was caught out when it placed new orders; suppliers had already switched to other industries when automotive manufacturing seized up completely in 2020 with population lockdowns. Short supply on parts meant lengthening waiting times as inventories dried up; some model lines’ output ground to a halt as models were unable to be finished for market due to critical parts being absent.

It wasn’t all bad news though. Transaction prices on vehicles that could be sold were high in conditions of healthy demand, especially in the US. Customers returned with a very healthy appetite for automotive product bolstered by historically very high savings rates. Lower spending on travel and tourism can perhaps translate to more household spending on other items – such as cars. Vehicle manufacturers’ bottom lines were – temporarily anyway – boosted despite serious manufacturing disruption and much lower volumes.

Tight manufacturing capacity in semiconductors and microprocessors will continue in 2022, but most analysts say the supply crisis will gradually ease.

The path of the Covid-19 pandemic – and its economic effects - continues to be unpredictable. In 2021 we saw how new variant waves could wreak havoc in different parts of the world at different times. In southeast Asia, the summer and autumn witnessed a steep rise in infections and population movement restrictions in a number of countries. Economies were hit and so were automotive supply chains. Even Toyota – seen as a resilient company with good supply chain risk management strategies – could not avoid the disruption to parts supply in a region that it has come to rely in for low-cost sourcing.

In 2022, expect the first quarter to see the supply constrained sales picture to continue before a gradual easing of the problem, especially as the second half of the year progresses, as structural solutions to the capacity problem bear fruit. Supply chain pressures won’t go away though, with some raw materials in tight supply across the world and higher energy prices working through.

At the time of writing, the course of the Covid-19 pandemic is somewhat uncertain due to the emergence of a new – and potentially more transmissible variant. It’s a reminder that the pandemic is still with us and will continue to be in 2022, even if the underlying picture is still one of recovery. Risks remain while so much of the world is unvaccinated and natural selection can create new variants. Government responses to the pandemic – and any associated economic impacts – will be something to watch in 2022.

Once again, we’ve canvassed views from around the industry on the outlook – read those in the ‘In Depth’ section. As ever, there’s plenty to be optimistic about, even as we face many challenges.

My best wishes to all for 2022.

Dave Leggett, Editor