Global Auto Industry...Future Depends on Electric Vehicle Competitiveness

[Asia Economy Reporter Park Jihwan] An analysis has emerged that the future of the global automotive industry, which recorded strong performances in the second quarter of this year, depends on competitiveness in the electric vehicle sector.

Jinwoo Kim, a researcher at Korea Investment & Securities, stated on the 15th, "Most companies exceeded consensus in the second quarter and are expected to continue strong performance in the second half of the year," adding, "However, stock prices are likely to diverge based on future car competitiveness, so attention should be paid to the localized competition in electric vehicles."

While most companies showed strong performances exceeding consensus, a relay of upward revisions to annual guidance continued. Daimler, Nissan, Volkswagen, and Ford all raised their guidance alongside exceeding consensus. On the other hand, GM fell short of consensus, and Toyota and Hyundai Kia disappointed the market by freezing their guidance despite exceeding consensus. The common background for the strong second-quarter performance was inventory shortages, resulting in reduced incentives, and increased profits in the financial sector.

It is explained that strong performance and demand recovery will continue in the second half of the year. The third quarter is expected to have a market condition similar to the first half, with utilization rates still low, inventory still insufficient, and incentives maintained at low levels. The shortage of automotive semiconductors peaked in the second quarter but the improvement is slow.

The profitability of automakers is expected to continue soaring. Researcher Jinwoo Kim said, "Although some markets are experiencing negative growth due to a higher base and the resurgence of COVID-19, this is considered a temporary phenomenon amid increased volatility." He predicted that demand recovery will continue at varying intensities and speeds at least until 2023.

From the second half of the year, stock prices among companies are expected to differentiate again. Researcher Kim said, "strong performances have already been largely reflected in stock prices," adding, "Now, beyond strong performances, attention must return to future car competitiveness."

The most important indicator in the current automotive market was identified as electric vehicle market share. In the past, only the global electric vehicle market share was considered, but now, since the timing and patterns of electric vehicle launches differ by region and company, attention must also be paid to the outcomes of localized battles. Researcher Kim stated, "Stock prices will diverge based on electric vehicle competitiveness," and "GM, Volkswagen, and Kia, which have competitiveness in electric vehicle platforms, are presented as the top global automotive preferred stocks."