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February 23, 2022
The Future Of The Auto Industry In 2022
What does the future hold for the auto industry in 2022?
The auto industry was thrown into chaos in 2021. From semiconductor chip shortages to soaring car prices, empty dealerships to shutdowns at manufacturing plants, 2021 was a year that changed everything for the auto industry.
The end of an auto industry era
One of the biggest surprises that came out of 2021 was when Toyoto announced in early 2022 that it had officially overtaken GM as the number one car seller in the U.S. The bombshell news marked the end to GM’s almost century-long reign at the top. The reason given for Toyota’s success? An innovative supply chain model.
Projections for the automotive industry in 2022 appear far from calm. Read our synopsis on what the future holds for the auto industry in 2022 and what this means for consumers.
1. No end to semiconductor chip shortages
The global semiconductor shortage — also known as the chip shortage — won’t end in 2022.
Semiconductor chips are essential building blocks of many of the products we use every day including cell phones, medical devices, vacuums, and vehicles.
The supply & demand mismatch
The chip shortage began back in 2020 but was brewing long before then. A combination of factors including a lack of manufacturing equipment and other components used to make them, as well as a surge in demand, led to the current rarity of computer chips.
The pandemic further increased demand for products that required semiconductors.
Couple this with a further decrease in supply, due to everything from COVID-related factory shutdowns, weather events, and energy shortages, means we won’t see a jump in microchip availability anytime soon.
2. Manufacturing woes won’t help a lack of supply
Supply chain, supply chain, supply chain. Who hasn’t heard these two little words spoken over and over again over the past two years?
When you consider the lack of available semiconductors and the need for chips to build vehicles, it becomes obvious why there’s a shortage of cars on the market.
A lack of chips means a drop in vehicle production. A slow in production means fewer automobiles make it to market. Add a shortage of workers to the mix, including COVIS-related absenteeism, and this means inventory on many car lots has been reduced from 40 days to less than 5 days.
Imagine seeing cars on a new car lot on a Monday and then, when you visit on a Friday, the lot is empty.
Auto manufacturing slow-downs
As the cycle continues, car manufacturing plants haven’t been able to work at full capacity. Under-producing factories are then forced to furlough employees further increasing labour and vehicle shortages. In the worst cases, auto plants have had to close down completely.
All this to say, inventory of new cars and wait times will remain low and high, respectively, well into 2023.
What about used cars?
When there are fewer new cars on the market buyers are forced to change gears, excuse the expression, and go the second-hand vehicle route. This has resulted in extremely low inventory on used car lots.
Car rental companies, which sold off their fleet at the height of the pandemic, are contributing to the low inventory by sweeping up used cars to build theirs back up.
The silver lining is that if you’re looking to sell or trade-in your vehicle, you can get top dollar for it.
The second-hand vehicle trend is expected to keep pace with chip and new car trends well into 2023.
3. Prices will rise. Again.
In December 2021, the average sold price for a new vehicle in Canada reached an all-time high of over $50,000. This new milestone price marked an increase of 12.7% compared to Dec. 2020.
Incentives on new car purchases have also been slashed across North America.
In the meantime, used car prices have also soared since the start of the pandemic. Price tags are up 40% since early 2020.
In both cases, price increases are expected to continue, albeit slow, into 2022 and 2023. Inflation plays a roll here as its carefully
4. Electric vehicles continue to be price-prohibitive
Every year, consumers hoping to buy an affordable electric vehicle (EV) are disappointed when prices don’t drop. Unfortunately, 2021 and the coming years will continue to let them down.
The reasons for this include, nor surprisingly, the pandemic, but the factors contributing to high EV prices are more complex.
Ineffective EV subsidies
Canada’s current EV subsidy program, for example, called iZEV, is meant to help consumers offset the cost of buying a pricier electric vehicle instead of its gas equivalent.
If you’re waiting for the cost of an EV to drop, you may be waiting for a very long time. Don’t expect it to happen in 2022, or 2023, or 2024.
5. Online car buying heats up
We shop online now more than ever. Why would buying a car be any different? It isn’t and the trend of people buying their vehicles online isn’t showing signs of slowing down.
When the pandemic made it impossible for people to go to the car dealership, the dealers created ecommerce sites so they could buy their vehicle online. It worked, and now more people than ever are building their cars, booking test drives, and finalizing their purchases online.
Don’t expect Amazon-speed overnight delivery on your new ride, however. When you order a car online, look to wait months — sometimes as many as six — for delivery.
6. China enters the world automotive stage
Did you know China is the world’s largest auto market?
On the flip side, China is considering opening their markets to outside auto manufacturers. Only fair when you consider they’re looking to expand world-wide.
Chinese automakers have been ready to enter other world markets for a while now, most notably the U.S. Experts project 2022 could be the year it happens – watch out Toyota and GM!
In another example of an East Asian car invasion, Vietnam is poised to enter the North American auto market in 2022.
The young Vietnamese auto company, VinFast, is slated to introduce two new battery-powered car models to the U.S. in the coming year.
8. Startups rev up
If Tesla could revolutionize the auto industry, why couldn’t another startup?
New technologies from budding companies is what we consider to be the most positive and uplifting auto trend for 2022. Rivian is one such startup that’s gained the support of big names like Jeff Bezos.
Here’s hoping we see more auto innovation as early as 2022.
What the Future of the Auto Industry in 2022 Means To You
As we settle into the first quarter of the year, there’s lots of time to see how the future of the auto industry will play out in 2022. Sit back, relax, and watch the action.
If we can leave you with one parting message it’s this:
Now, more than ever, take care of the vehicles you have.
Avoid having to enter into the current expensive, delay-ridden new and used car market.
- Book your vehicle in for a mid-winter maintenance check, auto body repair, or detailing
- Maintain the look and market value of your car, truck, and SUV by bringing it to us for a face lift.
- Ensure that when it is time to sell or trade in your vehicle, it will look its best and catch top dollar.
Contact us today to book.