Global manufacturers lay out new plans for the development of electric vehicle- (EV) focused manufacturing. Strong earnings from Ford highlight the long runway ahead for internal combustion vehicles despite the electric revolution. Inventory continues its gradual improvement as automakers beat consensus sales estimates. 

In transaction news, Stellantis has invested in Lyten to strengthen its EV battery development capabilities. Ford and Tesla announced a new partnership that will give Ford drivers access to Tesla’s network of fast chargers starting in 2024. Qualcomm announced its acquisition of Autotalks, Ltd., hoping to grow its automotive semiconductor business. 

In regulatory news, Kia and Hyundai reached a settlement in a class-action lawsuit with owners protesting the manufacturers’ anti-theft capabilities. GM announces a significant recall related to faulty child seat anchor systems. Regulators announce the findings of a new report detailing defective air-bag inflators that affect more than 6 million vehicles across multiple brands.  

Additional May insights are included below.

Financial Performance

The global semiconductor shortage is closing in on 1.25 million vehicles cut from automakers’ production plans for this year as of last week, according to AutoForecast Solutions (AFS), with last week’s cuts to production plans concentrated in Asia. AFS still expects approximately 2.8 million vehicles will be cut from production plans for lack of chips in 2023, down from 4.38 million in 2022 and 10.56 million in 2021. March U.S. light vehicle sales were up 9.3 percent year over year, beating out Bloomberg consensus estimates. 

Industry Update

March inventory levels ended at 1.80 million units, a slight decline from last month. Days’ supply (DS) closed at 39, approximately 19 percent below the five-year average and consistent with the last several months of results. The improvement in inventory comes as April sales reached their highest level since early 2021 on a per-unit basis. 
 
April U.S. light vehicle sales increased approximately 13 percent year over year, beating consensus estimates from Bloomberg. Vehicle mix continues to improve to record levels of large vehicles as average transaction prices remain steady but are elevated compared to this time last year. Expectations for full year 2023 remain moderate based on continuously growing production cuts, but signs continue to point toward a steeper recovery in 2024. 

Industry Focus — The Global ‘Race’ to EV Dominance

As EV sales hit 10 million units and topped 14 percent of car sales globally for the first time in 2022, automakers around the world have made clear they recognize EVs are the future. With more than $1.2 trillion committed to growing EVs and their batteries through 2030, the ‘race’ for the top in EV growth at a global scale is only beginning. 

Competition is heating up, but big names are falling behind

The competitive status quo that has defined internal combustion engine vehicles for years looks dramatically different with electric vehicles – both by manufacturer and geography:

When considering only battery-powered EVs (BEVs), Tesla remains the global leader in unit sales. However, Chinese manufacturer BYD experienced a boom in growth for both plug-in hybrids (PHEVs) and BEVs after shutting down production of all internal combustion engine models in April 2022. Continuing to eye aggressive expansion in export markets and with plans to build a new European plug-in factory by the end of 2025, BYD is emblematic of a rapidly growing (and world-leading) Chinese EV market. 

China leads the way

Sales of EVs (PHEVs and BEVs) more than doubled in China in 2022 compared to 2021, representing nearly 25 percent of all new vehicles sold (the U.S. hit 8 percent of total light vehicle sales in 2022). While Tesla is a leading performer in the Chinese market with Model 3 and Model Y vehicles assembled in Shanghai, lower cost domestic brands BYD and Wuling Hongguang have rapidly grown their market shares based on aggressive production plans. Additionally, EVs are exempt from license plate restrictions in China’s major cities, contributing to significant growth in their share of new vehicles sold. 

Chinese exports of EVs also more than doubled in 2022 compared to 2021. Tesla’s European shipments of the Model 3 and Model Y out of its Shanghai Gigafactory significantly expanded in 2022 and it expects the growth to continue. European manufacturers like BMW and Renault have a number of EV models that are manufactured in China and designated for export only as well. 

Toyota has been notably absent from the global EV stage . . . until now

Japanese automotive giant Toyota has lagged its traditional competitors in the EV market, publicly committing significantly less investment and focus to the development of electric vehicles. However, recent changes to senior management and growing market pressures seem to have laid the way for new plans; earlier this month, the company announced an additional $7.0 billion in planned investments. The company’s new goal to manufacture and sell approximately 200,000 EVs for its current fiscal year represents a nearly five times increase from the prior year. 

While Toyota has trailed its competitors in the BEV market, it remains the market leader for hybrid gas-electric vehicles that it first pioneered in the late 1990s. The company continues to generate significant cash from its hybrid gas-electric vehicles, but now plans to pivot more of those dollars toward development of BEV platforms. Toyota plans to introduce at least 10 new BEVs by 2026. 

Transaction Activity

Stellantis Ventures is investing in EV Battery startup Lyten, hoping to accelerate development on a lighter and more energy efficient lithium-sulfur battery. Ford and Tesla announced a partnership that opens access to more than 12,000 of Tesla’s fast chargers to Ford owners. Semiconductor manufacturer Qualcomm announced its acquisition of Israeli chip manufacturer Autotalks Ltd., hoping to grow its automotive-business sales pipeline. In total, transaction activity continues to highlight legacy automotive manufacturers’ attempts to buy or partner with sophisticated EV-related capabilities. 

See below for additional details on recently announced transactions.

• (5/25) Stellantis Ventures, Stellantis’ venture capital arm, is investing in lithium-sulfur EV Battery startup Lyten. The startup develops EV batteries made with three-dimensional graphene that promises reduced weight, higher energy density and a simplified bill of materials. 
• (5/25) Ford and Tesla announced an electric vehicle charging partnership that will give Ford customers access to more than 12,000 of Tesla’s fast chargers beginning in early 2024. Ford also announced it would be adopting Tesla’s charging port in future vehicles. 
• (5/8) Semiconductor manufacturer Qualcomm announced its acquisition of Israeli chip manufacturer Autotalks Ltd., whose chips specialize in crash-prevention technology in vehicles. Qualcomm did not disclose the terms of the deal but indicated it is looking to expand its automotive-related business.

Regulatory Landscape

Kia and Hyundai Lawsuits: Kia and Hyundai announced they agreed to pay $200 million to settle a class-action lawsuit from owners that claimed the vehicles were not properly equipped with anti-theft technology. The settlement will reimburse people whose cars were stolen and comes on the heels of several municipalities launching their own lawsuits against the manufacturers for the safety issues the lack of anti-theft technology presented. 

General Motors Recall: General Motors announced it would recall more than 660,000 vehicles for faulty child seat anchors. The recall affects Equinox and Terrain models built between 2020 and 2023, and vehicle owners are expected to be notified starting May 26.

Air-Bag Inflator Defect: Regulators recently announced the results of an investigation that found defects in airbag inflators manufactured by ARC Automotive that affect more than 50 vehicle models across 15 different brands. A Wall Street Journal investigation found the defect, which can cause the airbag to explode and spray a car’s interior with metal shrapnel, impacts at least 6.8 million vehicles in the United States. ARC Automotive disputes the findings.

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