We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
After a rocky 2020 amid coronavirus woes, market experts predicted a somewhat smoother run for the auto industry in 2021, with the hope that automakers are better equipped to deal with the crisis, having chalked out new strategies to survive and thrive. But just when things seemed to be looking up for the auto market in early 2021, with sales recovering from coronavirus lows, the industry got mired in another set of problems. As we flip the calendar, let us look back at the key stories and trends of the U.S. auto sector in 2021 that grabbed headlines.
Chip Crisis Bites the Industry
While carmakers slammed brakes on chip orders in 2020 amid COVID-19-led sluggish demand, electronic manufacturers — which witnessed a significant demand uptick amid the pandemic situation — snapped up excess supply. Meanwhile, pent-up demand and preference for private transportation resulted in a faster-than-expected rebound of vehicle sales in early 2021. This resulted in a mounting shortage of semiconductors, which left the industry in disarray.
Various auto biggies including General Motors (GM - Free Report) and Ford (F - Free Report) battled the semiconductor supply deficit, which hindered their business operations and forced them to idle production lines across the world once again. At a time when automakers were concentrating on replenishing vehicle inventory, production cuts further dried up the same. This year, the global chip deficit played a major spoilsport, upending auto market growth. Such was the wrath caused by the chip famine that the global auto industry is expected to have lost $210 billion in revenues this year.
Inventory Challenges Mount
The auto industry is struggling with low inventory. While the demand for vehicles remained high through 2021, limited vehicle supply amid chip crunch and high prices owing to tight inventories kept a lid on sales volumes.
Retail inventories remained below 1 million units in November for the fourth straight month, per J.D. Power and LMC Automotive. This left many customers having a hard time finding new vehicles and specific models at dealerships. Also, with prices going through the roof owing to supply-demand mismatch, some customers were willing to pay a premium for their preferred vehicle. Another set of consumers was not willing to pay a heavy premium and instead waited on the sidelines amid limited choice and high prices.
Birth of Stellantis
The mega merger between Fiat Chrysler and PSA Group led to the creation of Stellantis (STLA - Free Report) in January 2021. The automaker began trading on the NYSE on Jan 19. The merger brought together several brands, including Fiat Chrysler, Alfa Romeo, RAM, Jeep and Maserati, along with PSA’s Peugeot, Citroen, Opel and Vauxhall. Headed by Fiat Chrysler’s John Elkann as the Chairman and PSA’s Carlos Taveres as the CEO, Stellantis is the world’s fourth-largest automaker in terms of volume.
Tesla’s Entry in the Elite $1T Club
Tesla’s (TSLA - Free Report) market cap hit $1 trillion in October, following the biggest-ever order from car rental giant Hertz. On Oct 25, Tesla’s valuation crossed $1 trillion for the first time. It became the fifth company in the history of the United States to be worth more than $1 trillion. This was a historic moment for Tesla as it marked the auto giant’s entry into the coveted club of the highly valued tech companies that rule the American markets. What made TSLA's achievement all the more praiseworthy was that it was the first automaker to hit this milestone. Not surprisingly, Time Magazine recently named Tesla’s CEO Elon Musk as the “2021 Person of the Year”.
Dealership Merger Mania
A wave of consolidations swept across the auto retail industry in 2021. Big retailers flush with cash sought to scoop up smaller rivals in the hope that an increase in scale would help them lead digital transformation and boost competitive advantage. Dealership consulting firm Kerrigan Advisors predicted 350 total dealership transactions this year. This set a new record, making 2021 the biggest and most memorable year for auto dealership merger & acquisition activities in decades. More on 2021’s important M&A deals in the auto retail industry here: Is 2021 Shaping Up to be Another Banner Year for Dealership M&As?
Rivian’s Blockbuster Market Debut
Electric-vehicle maker Rivian Automotive (RIVN - Free Report) was the hottest IPO to hit the markets in 2021 and the fifth-biggest U.S. IPO of all time. It went public on Nov 10, 2021 through a high-profile IPO, with shares spiking 29% on the first day of trading from its initial offering price of $78 per share. Rivian now has a market valuation of around $90 billion.
Importantly, Rivian started deliveries of its R1T pickup truck this September, beating other auto giants including Tesla, Ford and General Motors by being the first to bring an electric pick-up to the market. RIVN currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Great EV Revolution
For years, it seemed that Tesla was the only automaker that was playing at the forefront of the EV phenomenon. But of late, things are changing as various big and small carmakers have started taking the concept of green vehicles seriously from a real-world functionality standpoint. In 2021, legacy automakers hit the gas on e-mobility push to gain a strong foothold in this red-hot space. General Motors pulled out all the stops to demonstrate its EV prowess. Close peer Ford also went the extra mile to take its EV game a notch higher.
Stellantis held EV Day on Jul 8, highlighting ambitious e-mobility goals to gain a strong footing in the red-hot EV landscape.
While automakers are all charged up, countries, states, and cities also stepped up their clean energy and e-mobility targets. California, New York, Japan, Canada, and the European Union laid out targets to phase out petrol and diesel cars by 2035.
With the broad-based transition toward environment-friendly vehicles in the United States, some of the world’s largest automakers dived into the business of producing batteries locally. You may delve deeper with this writeup: Auto Giants Bet on Battery Plants in 2021 for US Electric Future.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Shutterstock
A Quick Peek Into Major Auto Headlines of 2021
After a rocky 2020 amid coronavirus woes, market experts predicted a somewhat smoother run for the auto industry in 2021, with the hope that automakers are better equipped to deal with the crisis, having chalked out new strategies to survive and thrive. But just when things seemed to be looking up for the auto market in early 2021, with sales recovering from coronavirus lows, the industry got mired in another set of problems. As we flip the calendar, let us look back at the key stories and trends of the U.S. auto sector in 2021 that grabbed headlines.
Chip Crisis Bites the Industry
While carmakers slammed brakes on chip orders in 2020 amid COVID-19-led sluggish demand, electronic manufacturers — which witnessed a significant demand uptick amid the pandemic situation — snapped up excess supply. Meanwhile, pent-up demand and preference for private transportation resulted in a faster-than-expected rebound of vehicle sales in early 2021. This resulted in a mounting shortage of semiconductors, which left the industry in disarray.
Various auto biggies including General Motors (GM - Free Report) and Ford (F - Free Report) battled the semiconductor supply deficit, which hindered their business operations and forced them to idle production lines across the world once again. At a time when automakers were concentrating on replenishing vehicle inventory, production cuts further dried up the same. This year, the global chip deficit played a major spoilsport, upending auto market growth. Such was the wrath caused by the chip famine that the global auto industry is expected to have lost $210 billion in revenues this year.
Inventory Challenges Mount
The auto industry is struggling with low inventory. While the demand for vehicles remained high through 2021, limited vehicle supply amid chip crunch and high prices owing to tight inventories kept a lid on sales volumes.
Retail inventories remained below 1 million units in November for the fourth straight month, per J.D. Power and LMC Automotive. This left many customers having a hard time finding new vehicles and specific models at dealerships. Also, with prices going through the roof owing to supply-demand mismatch, some customers were willing to pay a premium for their preferred vehicle. Another set of consumers was not willing to pay a heavy premium and instead waited on the sidelines amid limited choice and high prices.
Birth of Stellantis
The mega merger between Fiat Chrysler and PSA Group led to the creation of Stellantis (STLA - Free Report) in January 2021. The automaker began trading on the NYSE on Jan 19. The merger brought together several brands, including Fiat Chrysler, Alfa Romeo, RAM, Jeep and Maserati, along with PSA’s Peugeot, Citroen, Opel and Vauxhall. Headed by Fiat Chrysler’s John Elkann as the Chairman and PSA’s Carlos Taveres as the CEO, Stellantis is the world’s fourth-largest automaker in terms of volume.
Tesla’s Entry in the Elite $1T Club
Tesla’s (TSLA - Free Report) market cap hit $1 trillion in October, following the biggest-ever order from car rental giant Hertz. On Oct 25, Tesla’s valuation crossed $1 trillion for the first time. It became the fifth company in the history of the United States to be worth more than $1 trillion. This was a historic moment for Tesla as it marked the auto giant’s entry into the coveted club of the highly valued tech companies that rule the American markets. What made TSLA's achievement all the more praiseworthy was that it was the first automaker to hit this milestone. Not surprisingly, Time Magazine recently named Tesla’s CEO Elon Musk as the “2021 Person of the Year”.
Dealership Merger Mania
A wave of consolidations swept across the auto retail industry in 2021. Big retailers flush with cash sought to scoop up smaller rivals in the hope that an increase in scale would help them lead digital transformation and boost competitive advantage. Dealership consulting firm Kerrigan Advisors predicted 350 total dealership transactions this year. This set a new record, making 2021 the biggest and most memorable year for auto dealership merger & acquisition activities in decades. More on 2021’s important M&A deals in the auto retail industry here: Is 2021 Shaping Up to be Another Banner Year for Dealership M&As?
Rivian’s Blockbuster Market Debut
Electric-vehicle maker Rivian Automotive (RIVN - Free Report) was the hottest IPO to hit the markets in 2021 and the fifth-biggest U.S. IPO of all time. It went public on Nov 10, 2021 through a high-profile IPO, with shares spiking 29% on the first day of trading from its initial offering price of $78 per share. Rivian now has a market valuation of around $90 billion.
Importantly, Rivian started deliveries of its R1T pickup truck this September, beating other auto giants including Tesla, Ford and General Motors by being the first to bring an electric pick-up to the market. RIVN currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Great EV Revolution
For years, it seemed that Tesla was the only automaker that was playing at the forefront of the EV phenomenon. But of late, things are changing as various big and small carmakers have started taking the concept of green vehicles seriously from a real-world functionality standpoint. In 2021, legacy automakers hit the gas on e-mobility push to gain a strong foothold in this red-hot space. General Motors pulled out all the stops to demonstrate its EV prowess. Close peer Ford also went the extra mile to take its EV game a notch higher.
Stellantis held EV Day on Jul 8, highlighting ambitious e-mobility goals to gain a strong footing in the red-hot EV landscape.
Japan auto giants also got serious to transition to all-electric transportation and making big electrification bets. For details, read: Electric Dreams of NSANY, TM & HMC in the Spotlight.
While automakers are all charged up, countries, states, and cities also stepped up their clean energy and e-mobility targets. California, New York, Japan, Canada, and the European Union laid out targets to phase out petrol and diesel cars by 2035.
With the broad-based transition toward environment-friendly vehicles in the United States, some of the world’s largest automakers dived into the business of producing batteries locally. You may delve deeper with this writeup: Auto Giants Bet on Battery Plants in 2021 for US Electric Future.