The automotive industry has recently seen slight improvements in the supply chain bottlenecks that have plagued it, specifically in obtaining raw materials and semiconductor chips. According to a report by Goldman Sachs analyst Mark Delaney on April 12, the supply constraints are “easing,” with noticeable advancements in electronics components and electronics manufacturing services.
Major players like Volkswagen (VLKAF) and automotive seating and electrical systems company Lear (LEA) have discussed the improved business conditions during recent earnings calls and investor conferences. Volkswagen stated during a March call that it anticipates the “structural shortage of semiconductors will improve and that raw material supply and logistics will gradually stabilize in 2023.” Lear also mentioned better-than-expected business conditions in mid-March and is “tracking toward the mid-point to the higher end of its full-year guidance.”
However, scheduling volatility during Q1 has persisted, and uncertainties around consumer demand will likely keep suppliers from making significant upward revisions to full-year outlooks. Both GM (GM) and Ford (F) have upgraded their expectations for growth, with GM raising its guidance by 5% to 10% on higher wholesale volume YoY and Ford assuming improvements in supply chain and industry volume in its 2023 guidance.
Automotive data and analytics company IHS Markit increased its global production estimate for 2023 from 85 million to 85.2 million vehicles in March, while Goldman Sachs forecasts 84.8 million vehicles. Sales of new vehicles in the US and Europe also saw YoY increases during Q1 and the first two months of 2023, respectively.
While the number of chips in shortage is declining, the report notes that the lack of key semiconductor parts will continue for part of this year. Additionally, lending may face constraints, particularly as nearly 30% of auto loans are underwritten by credit unions. Recent banking collapses and stress in the financial services sector could lead to a credit crunch, potentially affecting consumers’ ability to purchase new vehicles.