27.09.202113:48 Forex Analysis & Reviews: Global automotive industry facing escalating headwinds

The global automotive industry has been mulling over the question whether corporate earnings of automakers will be eroded due to the lack of a global shortage of micro circuits, spare parts, and chips. Moreover, CEOs of auto giants are trying to figure out the scale of losses and how long it will take to settle the matter. According to recent forecasts of IHS Markit, the global car sales market will fell short of 14.5 million new cars this year and some years later on.

Truck division Volkswagen Traton stated that sales in Q3 2021 would be much weaker than expected. The famous carmaker also warned that logistic problems will remain in Q4 2021, sliding into the next year.

French global automotive supplier Faurecia downgraded its forecasts of sales and corporate earnings on the grounds of gloomy prospects predicted by IHS Markit. The supplier of car seats, interior accessories, and electronics currently aim to ensure operation profits at nearly 6 – 6.2%, much lower than 7% in the previous forecast. Moreover, the company revised its earnings forecast by almost EUR 1 billion (USD 1.2 billion) to EUR 15.5 billion. German Hella GmbH, a manufacturer of lighting and electronic components which bought by Faurecia, also downgraded sales and profit forecasts for 2021.

Let me remind you that originally, the automotive industry encountered a challenge during the COVID-19 pandemic back in 2020. Lockdown of numerous car factories quickly entailed the lack of chips and car equipment. Nevertheless, they managed to rearrange their production facilities in favor of the sectors with a surge in demand. Later in 2021, the shortage problem got worse. A series of force majeure factors is to blame for serious disruption in delivery chains such as disasters around the world, hurricanes in Texas, fires at production facilities in Japan, COVID resurgence at factories in Malaysia and other countries. Economists at IHS Markit fear that looming restrictions due to the fourth coronavirus wave this autumn could put a strain on production facilities until late October 2021.

On the plus side, someone is optimistic about prospects of the automotive industry. Speaking at the high-tech conference last week, Tesla CEO Elon Musk said that he did not see problems for availability of chips and circuit chips for Tesla production facilities in the long term. Musk pointed out that disruption in logistic chains would come into play only for the short term. The eminent entrepreneur explained his viewpoint that a lot of chip manufacturing facilities are being built nowadays so that demand for chips will be well satisfied next year. Anyway, downbeat financial statements for Q3 2021 could reflect serious headwinds in the automotive industry in different spots on the Globe. This will be allowed for in manufacturing PMIs. All in all, it does not make sense to rely on an instant recovery in global stock markets in the wake of the policy meeting of the Federal Reserve last week.