What future for the automotive industry in 2022?

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From critical semiconductor chip shortages and shutdowns of major assembly plants, to soaring car prices and empty dealerships, 2021 has been a year to remember for automakers and consumers alike. But there has also been an increase in sales of electric vehicles and a growing shift from sedans to SUVs and pickup trucks.

So, what lies ahead for 2022? It may be more or less the same, some say, as shortages continue to leave dealers struggling for inventory and consumers with ever higher prices. But buyers will also find many more options if they are looking for an electric vehicle.

Here are the scenarios that should dominate this year:

Ongoing product shortages

When Covid-19 hit, automakers cut orders for production and parts. But, when sales started to rebound, they discovered they couldn’t get all the semiconductors they needed, which led to big production cuts. The industry lost an estimated $ 210 billion in revenue in 2021, according to business management consulting firm AlixPartners. As woodchip supplies are now slackening, they are far from returning to normal and production reduction will be affected until 2022. Worse yet, the industry is facing other shortages affecting products like tires, interior plastics and seat foams.

In total, automakers around the world produced around 8 million fewer vehicles than expected in 2021, due to product shortages. Even if production rebounds, dealers won’t be able to replenish their inventory until 2022, according to JD Power analyst Tyson Jominy. As a result, buyers should expect limited choices as prices continue to rise at an all time high. At the end of 2021, a typical new vehicle cost $ 45,000, up about $ 8,000 from December 2020, according to industry data.

Standardization of online car buying

When America went into lockdown, the industry discovered a new idea. Since customers couldn’t come to dealerships, dealers came to them – through the Internet. Even after the country reopens, more and more customers are buying their cars online, and many retailers are scheduling test drives and then delivering new vehicles to the buyer’s home or office. Meanwhile, with exhibition grounds nearly empty, normally impulse-driven American motorists began ordering their cars and waiting – sometimes for months – for delivery.

Electric vehicles start their movement in pole position

They represent a modest fraction of new vehicle sales in the United States, but the demand for battery-electric vehicles has doubled in the first half of 2021 alone. This year could mark the “tipping point,” argues GM CEO Mary Barra, with the explosion of the electric vehicle market. Several factors will play a role, starting with a plethora of new offerings: Analysts predict the number of long-range models will quadruple this year.

The impact of Building Back Better

President Joe Biden has put a lot of emphasis on the auto industry. In December, the White House announced its most aggressive fuel economy standards, and Biden said he wanted electric vehicles to account for up to 50% of sales in the United States by 2030. His bill infrastructure provides funds for a national charging network. But other funds, including money to boost incentives to sell electric vehicles, are currently blocked in Congress.

Startups will continue to make things happen

The auto industry had been a largely closed club since World War II, but Tesla has shown that it is possible to crack the code. Now, other start-ups want to share its success. Wall Street has honored several of the most promising players. Rivian now has a market cap of over $ 90 billion, more than either Ford or GM. But others, like Byton, Lordstown Motors and Faraday Future are in trouble and could collapse in 2022.

Tesla takes a little heat

At first glance, 2022 should be a good year for Tesla after setting sales and profit records in 2021. The California-based electric vehicle maker has two new factories, one in Austin, TX; and the other in Berlin. But several key products, including the Cybertruck, are way behind schedule, as are the next-generation batteries that Tesla is counting on. Tesla is under pressure from the Chinese government and faces more security probes from US regulators.

Autonomous vehicles could stall

Automakers have already pledged to have a fully autonomous vehicle ready by 2020. However, 2022 could see some breakthroughs. GM and Mercedes-Benz are set to roll out the first true (industry level 3) hands-free driving technology to consumers. Others, like Waymo and Cruise, focus on ridesharing services and freight carriers. But ongoing safety probes involving Tesla’s autopilot serve as a warning about the difficulty of developing a fully autonomous vehicle.

China is getting closer

China is the world’s largest auto market, but domestic manufacturers like Geely and Great Wall want to go beyond its borders. However, efforts to enter the United States, the world’s second largest market, have been repeatedly delayed. Trade frictions under the Trump administration have yet to be resolved under Biden. So while a handful of Chinese-made products are available in American showrooms, including the Buick Envision and the Polestar 2, a real auto invasion could be years away.

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