Despite the production issues that have arisen as a result of chip shortages, here is an indication of the auto industry's confidence:
“Our pricing is just strengthening every day,” Chief Executive Officer Jim Farley said at Deutsche Bank’s automotive conference recently. “It’s pretty breathtaking, actually.” Ford Motor Company has revised its previously bleak financial outlook, saying it now expects stronger second-quarter results due to increased demand for its models and a sharp increase in the prices consumers pay for them.
It’s not a surprise to the executives who follow TechnoMetrica’s Auto Demand Index each month.
The TechnoMetrica Auto Demand Index (ADI) rose 12-points, or 4.3 percent, to 180 in June. The average ADI since the onset of COVID has been 168, compared to 180 this month.
What Is ADI?
TechnoMetrica Market Intelligence developed the Auto Demand Index, or ADI, to measure consumers' intent to buy or lease a new vehicle in the coming months.
Every month, we conduct a national survey with 1,300 adult Americans and ask the critical question, "How likely is it that you will buy or lease a new vehicle within the next six months?" Based on the responses to the question, we compute an index score. For example, in our June survey, 14.8% of respondents said they are very likely to buy or lease a new vehicle, and another 15.0% said they are somewhat likely to do so. We index these purchase intent levels to our anchor - i.e., vehicle purchase intent level of 16.5% in the first quarter of 2007 to 100.
TechnoMetrica has been tracking auto demand since 2007, and the data is a good predictor of what will happen in the near future. The index's valuable intelligence can help OEMs and their suppliers plan production and incentive programs and take proactive measures.
Both our index momentum and actual sales momentum are strong.
Despite a drop in June's momentum, our momentum indicator for the Auto Demand Index remains strong. Since we began tracking it in February 2007, the indicator reached its all-time highs this past December and January at 15.6.
The official annualized sales totaled 16.988 million units in May, moderating from its ten-year high of 18.771 million units in April. However, actual retail auto sales for May and the next few months may post slightly lower due to a combination of low inventories and production and shipping delays caused by chip shortages.
The momentum indicator based on the seasonally adjusted annual auto sales rate is slightly off of its all-time high of 0.7 million units.
We use the difference between the 6-month exponential moving average (fast average) and the twelve-month exponential moving average (slow average) as our momentum indicator.
Sizing Up The Current Economic Environment
The U.S. Federal Reserve raised its forecast for the rate at which the U.S. economy will expand in 2021 from 6.5 to 7% while maintaining a solid growth rate estimate of above 3% for 2022.
At TechnoMetrica, we anticipate that the rebound will be impressive, allowing us to put the pandemic's dark days behind us.
The Investors Business Daily/TIPP Economic Optimism Index, a leading measure of consumer confidence, rebounded after a slight dip in May. The index rose 3.7 percent, recapturing the pandemic high of 56.4, set in April, before falling back in May.
The index's reading of 56.4 in June keeps it in positive territory for the sixth consecutive month. It also ties April's reading/data, for the highest reading, since February 2020 (59.8), before the pandemic slump. Still, the confidence in June is 5.7% below the pre-pandemic level of Feb 2020.
Consumer spending drives two-thirds of the economy. Optimistic consumers spend money on automobiles, home improvements, new homes, and other big-ticket items.
Multiple factors are helping to keep the index and its components in the positive zone.
- Many states have resumed normal operations, and by the Fourth of July, much of the country will be open with few restrictions.
- Nearly one-half (46%) in our poll said they are fully vaccinated, and another 17% had their first shot.
- Consumer perceptions have shifted significantly, and Americans are generally optimistic about putting the pandemic behind them.
Chip Shortage Status
As a result of the ongoing semiconductor chip shortage, the automotive industry is suffering. Vehicles today may contain over 1,000 chips.
Semiconductor chips are used in critical systems like braking and steering. Additionally, more chips are likely to be used in luxury vehicles' infotainment and safety systems.
The supply chain bottleneck begins at the wafer level. Wafers and semiconductors are combined to form a chip used in a vehicle's steering, brakes, and infotainment systems.
The shortage began early last year when Covid forced rolling auto plant closures. As the plants shut down, wafer and chip suppliers diverted the parts to other industries, such as consumer electronics, which were not expected to be affected by stay-at-home orders.
TSMC (Taiwan Semiconductor Manufacturing Company), the world's largest chip manufacturer, expects to be able to meet the "minimum requirement" of customer demand for auto chips by the end of June.
Those monitoring the supply chain believe there will be enough by the third quarter to get everyone back up and running, for the most part. Things should pick up again in the fourth quarter, and we'll be back to normal by next year.
Hot Demographic Segments
Parents, households with incomes of $100,000 or more, those between the ages of 25 and 44, urban households, Blacks and Hispanics, and those who are married are the demographic segments most likely to shop for new vehicles.
Regionally, the South is the most bullish, followed by the Northeast and the Western United States. The Midwest comes in the last place.
Urban areas are hot, suburban areas are moderate, and rural regions are cool.
The average purchase lead time shrank even further, to 96 days, according to our latest data. The shrinkage over the past 18 months is approximately 21%. Market momentum and consumer eagerness to purchase a new vehicle drive the market's time frame to a closer conclusion.
The data in the chart below is for the previous 18 months and represents historical trends. (Note the downward trend line.)
Luxury vs. Non-Luxury
The luxury market appears to be in good shape. We anticipate that luxury sales will account for approximately 42 percent of total sales, with non-luxury sales accounting for the remaining 58 percent.
We expect the sales ratio between Asian, European, and American OEMs to be 34 percent, 32 percent, and 35 percent, respectively. This may be the closest market share we have ever seen in this country - split equally among the vehicle manufacturers from these three regions.
Hot Vehicle Types
Mid-size (18%), Compact (17%), and small SUV (13%) are the most popular, followed by sub-compact (12%) and luxury SUV (10%).
We see a three-way tussle between Chevrolet, Toyota, and Ford in the non-luxury segment. BMW, Audi, and Acura lead the luxury segment.
Robert Austin's Views
Retail auto sales for the next two months may still appear slightly low due to the combination of low inventories; and delays in production and shipping due to chip shortages.
Virtually all auto companies have announced new hybrid and pure battery-powered electric vehicles during the last few months. However, with electric vehicles still representing just about 2% of the new car market, it will be interesting to see if the demand for purchasing these cars grows as quickly as their availability does.
While the industry has been pleased of late because they haven't been compelled to incentivize sales, it just could be that the rapid buildup of hybrids and EVs might make them the next battleground requiring incentives.
Raghavan Mayur's Views
On the demand side, the economy as a whole is strengthening, which benefits the automotive industry. Demand will continue to outstrip supply until chip shortages, and production bottlenecks are resolved.
As a result, numerous customers will have difficulty locating the desired model. Those new car buyers who cannot purchase their desired models will almost certainly increase the demand for gently used vehicles.
OEMs can charge a premium for their products while offering minimal incentives.
Auto sales are expected to remain robust in the coming months, hovering around 17.5 million units on an annualized basis. TechnoMetrica's forecast was correct, as evidenced by actual vehicle sales.
A significant unknown is gasoline prices, which could dampen demand.
About The Survey
From May 26 to May 28, TechnoMetrica polled 1,305 adults online using a sample taken from its online panel network. The credibility interval for the survey is +/- 2.8 points.
A U.S. draft bill calls on the White House to enhance deterrence against a conflict across the Taiwan Strait and cooperation with allies.
The Ministry of Foreign Affairs thanked the U.S. ambassador to the UN for exposing the truth of China’s “shameful behavior” after she condemned Beijing for using vaccine diplomacy to coerce other nations.
China exerts a “malign influence” on the UN that “promotes an authoritarian approach to multilateralism,” Linda Thomas-Greenfield said.
Its tactics include threatening to cut the COVID-19 vaccine supply if countries do not follow China’s lead.
For example, Haiti, a diplomatic ally of Taiwan, has been under “tremendous pressure” by Beijing, she said, calling on Washington to help Taiwan’s allies, as “many of them don’t have the wherewithal to resist the pressure that China is putting on them.”
In addition to Haiti, Beijing has also pressured Taiwanese allies Paraguay and Honduras to swap diplomatic recognition in exchange for vaccines.
Official says temporary shutdown for repairs started on Saturday and could last up to four days, possibly causing power outages.
Iran’s sole nuclear power plant has been temporarily shut down for a “technical overhaul,” Iranian state TV has said.
This is the first time Iran has reported an emergency shutdown of the plant, located in the southern port city of Bushehr.
It went online in 2011 with help from Russia. Iran is required to send spent fuel rods from the reactor back to Russia as a nuclear nonproliferation measure.
In March, nuclear official Mahmoud Jafari said the plant could stop working since Iran cannot procure parts and equipment for it from Russia due to banking sanctions imposed by the United States in 2018.
Bushehr is fuelled by uranium produced in Russia, not Iran, and is monitored by the United Nations’ International Atomic Energy Agency (IAEA).
Officers could be punished for authorizing the use of stockpiled food, fuel, and medicine.
A North Korean investigation into military combat reserve supplies has revealed shoddy maintenance and discrepancies between inventory records and actual supplies of food, fuel, and medicine, sources in the military told RFA.
According to the source, the inspection is underway simultaneously in all branches of the military and all units.
North Korea’s total military personnel of 1.47 million in 2018 ranked it third globally that year, behind only China and India. The country remains technically at war with South Korea and its ally, the United States.
The ministry and the staff department inspect units of corps level or above twice per year and three times per year for divisions and brigades, and once per quarter for units of the regiment level or lower.
According to 2019 data from the CIA World Factbook, North Korea spent between 22 and 24 percent of its GDP, roughly U.S. $3.7 billion to $4.2 billion each year between 2007 and 2017.
The Tánaiste (Irish deputy PM) Leo Varadkar has said there are people for whom it will "always be the wrong time" to talk about Irish unification.
A united Ireland could happen in his lifetime, and no group should be able to veto it, he told his Fine Gael party's Ard Fheis (conference) last week.
He added there was "no majority anymore in Northern Ireland either for unionism or nationalism." However, he said unification must not be the "annexation" of Northern Ireland.
The party leader drew some criticism about the timing of his comments.
Northern Ireland Secretary Brandon Lewis said he was surprised by Mr. Varadkar's remarks and urged politicians "to dial down the rhetoric, particularly at this time of year."
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