General Motors Expects Vehicle Production Boost

As vehicle microchip supplies improve to give auto dealers more inventory to sell, buying a new car should become easier in 2022, but questions remain of at what cost. 

On Tuesday, February 2, General Motors (GM) announced a projected increase in the number of vehicle inventory from 25% to 30% this year to ship to auto dealers globally. Despite the semiconductor shortage holding back much of GM’s vehicle deliveries in the second half of 2021, the expected jump would make up for lost time and money. 

Even with GM’s prediction, Toyota, for example, has already cut its production target for the month of February due to persistent bottlenecks, in which the forecaster IHS only expects an 8.5% growth in vehicle production globally this year with supply chain shortages continuing into 2023. 

While GM did have record profits in 2021 due to limited output forcing consumers to compete for vehicles in stock at dealers, the company expects to have less profitable sales this year and looks to focus on restoring the production on smaller SUVs and sedans.  

As a whole, GM expects normalization to reappear in the supply of cars, but the company doesn’t expect much profit growth this year. Looking ahead to 2023 and beyond, GM has a vision for improving revenue, but much of that will depend on unproven business models and technologies around EV software, which are already starting to emerge. 

What the Inventory Shortage Means for Vehicle Leasing

As the automotive microchip shortage has caused vehicle inventory disruptions for auto dealers,  used-car availability is shrinking even more, shaking up car leasing with prices increasing at new levels. 

When leasing a vehicle, it typically equates to paying a lower monthly fee rather than financing the same purchase, however, the decreased inventory isn’t just minimizing incentives on purchasing a vehicle, but also raising lease prices. 

While many agree that leasing was considered a “no-brainer” for customers prior to the vehicle shortage, factors such as higher MSRPs, reduced incentives and increased rates, have caused the shift for more consumers to buy. Even though lease rates are rising with transaction prices, leasing companies aren’t pressured to leverage higher resale values to lower the monthly lease payment. 

Despite these challenges with the inventory shortage, leasing is still one of the best options for consumers, but it’s more important than ever now to have a plan if considering a vehicle lease in the near future. This plan includes comparing the cost on a lease to a traditional car loan and evaluating what the best option is in terms of total incentives and the overall total cost.

As 2022 continues, car lease marketplaces, like, will still see large increases in the number of leases getting bought out, in which it benefits both the auto dealer and the person listing the vehicle. Buyers at dealers will have access to more used vehicle inventory and more selection to choose from; and people listing vehicles from brands with unfavorable and outdated lease policies will have more success escaping their lease contracts.  

Research pushes auto industry closer to clean cars powered by direct ethanol fuel cells

Zhenxing Feng from Oregon State University College of Engineering helped lead the development of a catalyst that solves three problems associated with direct-ethanol fuel cells (DEFC): low efficiency, the cost of catalytic materials and the toxicity of chemical reactions inside the cells.  

With collaborators from Oregon State, the University of Central Florida and the University of Pittsburgh, results showed putting fluorine atoms into palladium-nitrogen-carbon catalysts had several positive effects, like keeping the power dense cells stable for nearly 6,000 hours. Catalysts are substances that increase the rate of reaction without underdoing permanent chemical change itself.  

Since motor vehicles with combustion engines are a main source that emits the greenhouse gas C02, alternative energy conversion devices using fuel from renewable and sustainable sources are urgently needed. Feng said that direct-ethanol fuel cells have the potential to replace gasoline and diesel-based energy conversion systems as power sources.  

Currently, Feng and collaborators are soliciting funding to develop prototypes of DEFC units for portable devices and vehicles. He believes that if successful, this device can be used for commercialization in five years and with more industrial collaborators, DEFC vehicles can be implemented in 10 years.  

Regarding the product, ethanol consists of carbon, hydrogen and oxygen and is the active ingredient in alcoholic drinks, which can be derived from many sources like corn, wheat, grain sorghum, barely, sugar cane and sweet sorghum. In the U.S., most of the ethanol produced is made in the Midwest, most typically from corn.  

Feng explained that because a fuel cell relies on hydrogen and other fuels to cleanly and efficiently produce electricity, a wide range of fuels and feedstocks can serve systems as large as a utility power plant and as small as a laptop. With infrastructure already in place for producing and distributing ethanol, a benefit of this process is that plants absorb atmospheric carbon dioxide. Ethanol can also deliver more energy per kilogram than other fuels like methanol or pure hydrogen, which makes DEFC an attractive option for replacing internal combustion engines.  

Development of DEFC has significantly lagged due to low efficiency of DEFC, the costs related to catalysts and the risk of catalyst poisoning from carbon monoxide produced in reactions inside the fuel cell. In response to these problems, collaborators developed high-performance palladium alloy catalysts that use less of the precious metal than current palladium-based catalysts.  

Feng summarized that his team showed how introducing fluorine atoms into palladium nitrogen-carbon catalysts modifies the environment around the palladium, and improves both activity and durability for two important reactions in the cell: the ethanol oxidation reaction and the oxygen reduction reaction. He concluded that advanced synchrotron X-ray spectroscopy characterizations made at Argonne suggest that fluorine atom introduction creates a more nitrogen-rich palladium surface, which is favorable for catalysis. Durability is enhanced by inhibiting palladium migration and decreasing carbon corrosion.

2021 Analysis Ranks Honda No. 1 for the Lowest Total Cost of Service

Hyundai, Buick and Toyota have low costs of service, but it seems that Honda takes the cake this year. With the lowest U.S. service and warranty costs of all non-premium car brands this year, Honda ranks number one for the lowest total cost of service. In fact, the total service and warranty costs are calculated within the first three months of operating a Honda. 

Honda, according to We Predict, averaged just $21 in annual service and warranty costs in 2021. The comparative average of all non-premium car brands is $42, after the first three months on the road – double Honda’s average. 

The service costs for electric vehicles (EVs) within the first 90 days is much more than Honda’s. In fact, battery-powered cars cost more than twice the amount of gasoline and hybrid vehicles in the first three months. We Predict puts the average cost for EVs in the first three months at $123 while gasoline cars are at $53. Most impressive though, are hybrid cars which are $46 on average. Electric vehicles also have a higher cost for parts of labor, repairs, and service. In addition, the cost for EVs within the first 90 days is of the utmost importance as it predicts how much the vehicle will cost in the future. The cost after 36 months is about 15 times the initial three-month costs, and after 60 months it’s 20 times the three-month cost.  

Car brands with low initial service costs, like Honda, are expected to be the cheapest over time. Using data from the initial months of the purchase of a vehicle allows automotive companies to reduce warranty costs, identify problems earlier, and ensure customer satisfaction.  

With No End in Sight, The Chip Crisis Causes Impatience with Customers

As the chip crisis continues, dealerships are facing the problem of dismal inventory. With very little selection and the inability to restock as quickly, dealerships are met with an overly frustrated client base.

Customers are becoming increasingly frustrated as well as impatient due to the fear produced by little inventory. If a customer doesn’t claim a vehicle, it could be taken from them with no alternative. Consequently, across the nation, there have been tense incidences of customers fighting for the same product.

For instance, an altercation between two customers took place at a South Carolina dealership over an SUV! After one potential buyer saw another looking at the desired SUV, the buyer began to yell. He insisted, the potential buyer, that the other individual had no right to even look at the vehicle since he was set on purchasing it.

Unfortunately, occurrences like these will no doubt continue with little production. Assembly plants report either financial or physical setbacks. While General Motors in only using four of their 14 North America assembly plants, Toyota Motor Corp. is experiencing a costly cutback equivalent to about 360,000 vehicles of global output.

The root of these problems stem from the chip crisis. At first, several automakers and analysts were hopeful the crisis would solve itself out and normalize by the end of 2021. However, with evidence of coronavirus cases increasing, that prediction has been dismissed.

Over the past year or so, the automotive industry has dealt with its fair share of economic setbacks. The chip crisis is not only one of those setbacks, but an increasingly prevalent one. As to how the automotive industry handles as well as survives this crisis… only time will tell.

Low Supply of Chips Cause Used-Car Prices to Soar

Due to a global shortage of chips, used vehicle prices have been soaring, leading to a decrease in availability among new vehicles and an increase in the trade-in values for older or used vehicles.  

According to the popular car research website, Edmunds, the average value of used vehicles traded in reached a record high number in March. Trade-ins averaged about $17,080 for the month, increasing about 21% from the same period one year earlier.  

The global chip shortage has primarily caused this, as it has obstructed the auto industry’s ability to produce and manufacture new vehicles. As a result, this has motivated individuals to shop for used vehicles, causing prices to soar. The global chip shortage occurred due to the COVID-19 pandemic’s disruption on the supply chain. In turn, this has caused a disruption in new vehicle production, but it has also caused car-shopper demand to surge.  

Additionally, the market for certified pre-owned vehicles is highly advantageous to car-sellers currently. According to Cox Automotive, used vehicle sales increased about 36% from February to March, allowing for total used vehicle sales to increase about 117% from March 2020. On the other hand, the amount of new vehicles available for sale has decreased 36% since March 2020, and new vehicle inventory has decreased more than 15% since the global chip shortage occurred.  

Clearly, now is a great time for consumers to sell their used vehicles, as well as to make new car purchases. Ivan Drury, Edmunds’ senior manager of insights, stated that the “inventory situation is not going to get any better any time soon, and consumers could essentially be wiping away multiple car payments with the added value of their trade-in.”  

Increase in Used Car Prices Due to Covid-19

For the last several years, automakers have taken several actions in order to increase the prices and make more profit out of every sale in an effort to reduce their exposure to cars that offer less profit potential. In fact, large manufacturers such as Ford, GM, Fiat, and Chrysler have stopped the sale of numerous sedans; similarly, companies like Honda and Toyota have also reduced the sales of lower-priced vehicles. 

The global pandemic came to shake things up, starting with the way food is purchased all the way toward how people buy their cars and trucks with greater emphasis onlineThe global shortage of computer chips necessary for vehicles has had a significant impact on this matter. Due to the lockdowns and strict quarantine during the first few months after the virus started, the auto industry started to face some changes in their North American factories, the functioning and production of the industry also seemed to be affected by it. Because the production was inexistent or reduced for a period of time, the industry entered to a phase of very high-demand and lower supply which caused an imbalance within the industry. This has lead to a big jump in prices. In other words, too few vehicles while having too many customers.  

Since it is true that most people are shifting their lifestyles toward a larger emphasis of staying at home, many would infer that cars would not be needed as much. Howeverthe opposite trend has happening this year. The pandemic and importance of social distancing actually reduced the interest in public transportation, thus increasing the reliance on personal cars and trucks. Therefore, many of those who relied on public transportation had to look for other safer alternatives to go out and be socially distant with one other. Without a doubt, buying a car is definitely a covid-friendly transportation alternative.  

Affordability remains an issue for many. While used cars might be the solution for those who can afford new car, the availability of used cars needs to increase in order to meet up with the high demand. Unreasonable prices are expected to open the door to dealers that would focus and get profit from low-priced new cars specifically, vehicles that count with the basic features and nothing else. is noticing a trend where more people are utilizing the marketplace to find just the right car at the right payment level; one that they may not find at a dealer today. 

The Auto Industry Warns New-Car Buyers With Subprime Credit

How about good and suitable used cars? This is the invitation that the American auto industry has for those new-car buyers with a subprime credit score. Jonathan Smoke, chief economist for Cox Automotive Inc., at the American Financial Services Association annual Vehicle Finance Conference, on February 26 got to the conclusion that the new car industry niche is getting smaller over the time; it targets certain type of buyer and it gives a significant amount of attention into the credit profile of the prospective costumer. Although it is true that the business offers vehicle options from every size, color and design; subprime credit score will not be a beneficial aspect in any new car purchase, that is for sure.  

Smoke also talks about the commonly held belief that there is a new car for any budget or any situation; unfortunately, it is not as ideal as it sounds. In many cases, buying a brand-new car is not the best option and that is okay. Obtaining a used vehicle does not mean you are compromising quality nor safety; opting for secondhand cars can avoid stretching to stay up to date with unnecessary and unsustainable payment plans. 

According to Experian Automotive, all credit scores underneath six hundred are considered to be subprime. Over the pass of time, subprime customer numbers keep going down; in fact, today, that type of customer does not reach ten percent of the auto sales. At the same time, prices keep getting higher and the production of less expensive vehicles is decreasing. Cox Automotive stated at the online conference held recently “We essentially no longer have entry-level vehicles in the new-vehicle market.” Because of that, used cars are literally becoming the new entry-level vehicles, only those that are certified and are resold legally, of course.  

It is very probable that the global pandemic might have been one of the top influential factors in this change on the market; however, automakers are taking measures that are beneficial for them as a business, but also for the consumers that expect some needs to be fulfilled when it comes to buying a vehicle. Reinvention has been needed and most of the biggest automakers are still making decisions about the issue, some are still taking in the fact that subprime buyers could be out of the business.  

Credit history and performance will remain important, and it is imperative that any shopper on maintain the right amount of credit to take over an existing lease. 

Hyundai and Kia Closer to Apple Car Deal

For years there have been speculations about Apple diving into the automotive industry by launching its own car; throughout the following years, It will be materializing all of the rumors. Hyundai and Kia have been working vigorously toward closing a deal with Apple on the development of its own autonomous and electric car which up until now has been referred to as the ‘Apple Car’.

However, there is no certainty of the partnership; in fact, many presume that Apple will end up working with a different automotive company since there is no evident nor strong reason for them to select this auto company. Both public relations representatives declined to answer or confirm the veracity of the deal, which leads us to assume that if the business is not structured yet, then there is still a lot of time for the concrete product to be launched.

Morgan Stanley analyst Katy Huberty pronounced herself on the financial aspect of the deal; she stated that this could immensely benefit Apple, to a point where they could reach ten trillion dollars by developing the Apple Car market. Even though their smartphone business is significant, the company would only need to buy 2% of the new deal shares in order to reach five-hundred billion dollars which is the annual amount sold in phones.

Needless to say, the car is planned to count with the highest level in technological structure and it is expected to be a self-drive car, meaning no one should be inside the vehicle in order for it to mobilize from one place to another. Also, many anticipate for it to be electrical and environmentally friendly. With that being said, it is fair for the public to expect either similarity or connections with the prestigious company, Tesla. Although Musk himself said that Apple CEO Tim Cook rejected the invitation of working together; without a doubt, these two successful companies together can start a completely new trend in transportation, robotaxis and self-driving cars. These types of innovations can transform the way in which food is deliver, how private and public transportation function, and many more things that only companies with such influence could achieve.

Should the Apple Car come to fruition, it will one day be a popular choice on the marketplace.

Ford Production Is Also Being Affected by Chip Shortage

Semiconductor chips are essential when it comes to the manufacturing of new cars, it is connected with several important systems of the vehicle and they allow the engine to function as it should. Although these chips are seen in electronics and other consumer products, the current shortage has been seen in a specific industry. Last year, the entire automotive industry started noticing a shortage in the availability of this key piece; the auto demand had a very rapid and unexpected peak. Because of that, many companies were affected, and the global automotive business ends up on the same boat, since they all needed semiconductors in some way or another.

Ford is one of the companies from the auto manufacturers that already started cutting production down; action had to be taken due to the semiconductor chips shortage mentioned above. While they were doing great with their very profitable F-150 truck, the production had to be lowered to only two shifts per day, one less than before. Fortunately, the two plants that dropped production are expected to go back to normal by the end of February of this year, according to Ford spokeswoman Kelli Felker. Though the shortage is no good for the production numbers, the company’s stock shares have not felt the impact yet, in fact, they surprisingly went up.

Ford is just an example, important competitors of the brand had to make similar cuts in production. Volkswagen, Subaru, Toyota, Nissan, and various others are going through the same experience, expecting to be thousands of vehicles short of what was sold last quarter. The one purpose for them right now is to keep the plants running and to minimize the impact of the shortage in their financial realm. Ford president, Kumar Galhotra pronounced himself about this matter, referring to the semiconductor shortage as a “dynamic situation”. He expressed the effort that is being done in order to find solutions as fast as possible and the concern to relieve the damage that has been done.

General Motors confirmed some changes as well, what was going to be done at certain selected plants around the globe (Fairfax, Kansas; Ingersoll, Ontario, and San Luis Potosi, Mexico, South Korea). It is noticeable how the shortage has affected the industry; it is still unknown how it will evolve in the future, is hard to know if it will get better or worse. But what we do know is the changes and effort that come from the automotive companies, solutions are on their way.

Should the chip shortage significantly impact the supply of new vehicles in the months to come, demand for vehicles is expected to grow significantly in markets such as for existing vehicles.