The auto industry will confront various challenges this year as automakers expand investment in electric vehicles and move on from the COVID-19 pandemic, speakers at a Federal Reserve Bank of Chicago conference said today.
“There are hurdles ahead,” said Kristin Dziczek, a policy advisor for the Fed Reserve Bank, said at the gathering, held at the bank’s Detroit branch. “We’re still not back to normal.”
Among the challenges:
--High vehicle prices: Prices of cars and light trucks have continued to rise. With COVID-19, production fell and availability of cars and trucks decreased. Automakers sold fewer vehicles at higher prices.
“The pricing power is going to remain on the sellers’ side,” said Haig Stoddard, senior industry analyst for Informa Tech Automotive Group/Wards. “Inventory is going to still be lean and mean.”
The affordability issue is extending into used cars and trucks, speakers said.
“A lot of people are not going to be able to afford used cars and trucks,” said Charles Chesbrough, senior economist for Cox Automotive.
--Uncertainties with the shift to EVs: Automakers are investing in new electric vehicle models, battery plants and other expenditures related to EVs.
There are still questions how quickly the transition occurs, speakers said.
“It’s going to take a long time to cycle through” traditional internal-combustion vehicles “to transitioning to an electric fleet,” Chesbrough said. The average of a light vehicle today is about 12 years, he said.
Some potential buyers may hold onto their internal-combustion cars or trucks before switching,” he added.
--Labor negotiations: Detroit automakers General Motors Co., Ford Motor Co. and Stellantis will conduct labor negotiations in 2023 with both the United Auto Workers in the U.S. and Unifor in Canada.
The UAW and Unifor have different negotiation cycles, four years for the UAW and three for Unifor. As a result, the Detroit automakers rarely negotiate with the unions in the same year. The automakers have to conduct talks with both unions in 2023.
The unions are concerned about potential job losses and plant shutdowns with the transition to EVs, Dziczek said.
“We have much more combative” labor issues, she said.
“The UAW understands this transition is coming,” Dziczek said. Union members are seeking job protection.
“There’s a lot of things on the (union) want list,” she said. “I think we’re going to have an extended (negotiation) process.”
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