Fuel For Thought

The automotive industry has been working at a fever pitch since late May when we emerged from the COVID-19 driven output closures. The combination of depleted vehicle inventories and a strong sales pace has equated to the industry's inability to return to normal inventory levels until early next year. Even with a 2-month break, we will still build approximately 13 million light vehicles in North America for 2020. Outside of these short-term market disruptions, smarter suppliers are still looking past next quarter to the future. Our industry is in the midst of significant structural shifts surrounding vehicle electrification, autonomous driving system content and a changing vehicle value equation. If you are a supplier, strategic questions surround your future risk profile, financial performance and how these changes impact future competitiveness. Does one benefit from these shifts, suffer a declining market or in some cases – are you agnostic? Whatever the perspective, these shifting industry dynamics call for a Supplier Strategy Reset. This has been Michael Robinet with an IHS Markit Minute.

A recent analysis of IHS Markit new light vehicle registrations through July this year finds sport utilities account for 50% of all new vehicle registrations, up from 31% ten years ago. If today's mix continues for the remainder of this year, it would mark the first time in recent history that one body style has captured half of the U.S. new vehicle industry. Market share for mainstream pickups has also grown, driven in part by intense competition among the domestic manufacturers that dominate this space. Through July, pickups account for 19.9% of all new vehicle registrations in the US, outpacing sedans for the first time in recent history. With SUV/CUVs and pickups now accounting for more than two thirds of all U.S. new vehicle registrations, manufacturers need to ensure that their product portfolios align with this new paradigm. I'm Tom Libby with an IHS Markit Minute.

So you're looking to purchase a new car in the state of California in 2035? Well, you can have any powertrain you want, as long as it's electric! California Governor Gavin Newson signed an executive order setting a goal of requiring all new passenger cars and trucks sold in the state to be zero-emission vehicles, which are battery electric or fuel cell, by 2035. Now all of this comes as California remains locked in a legal battle with the Trump administration. The state is suing over to reinstate a waiver that allows it to set its own fuel economy standards that are separate from the federal government's. If Donald Trump is re-elected, we expect the battle to be decided in the courts. But if Joe Biden is elected, we expect California to have its waiver reinstated. So you may be asking, "Can automakers just choose not to sell cars in California if it does not want to invest in an entire fleet of electric vehicles just to fill a dealership?" Sure, but California is the biggest light vehicle market in the United States, representing 11% of total US sales last year. That really makes it a state that can't be ignored by the automotive companies. I'm Devin Lindsay, with the IHS Markit Minute.

US-based NVIDIA announces intent to acquire UK-based Arm for $40B. You may not know Arm by name, but the company's intellectual property is shipped in tens of billions of integrated circuits every year. In automotive, four out of every five processors in infotainment and driver assistance are based on Arm architectures—including those from NVIDIA. Both Arm and NVIDIA have long lists of ecosystem partners and a growing footprint in Autonomous Driving. But the combination of Arm expertise in scalable CPU design, plus NVIDIA expertise in GPUs and software, could create a one-stop-shop for anyone looking for automotive processors. The open nature of Arm architectures gives freedom to automotive engineers to develop and deploy scalable solutions from today's driver assistance to tomorrow's autonomous mobility… pending regulatory approvals, of course. I'm Jeremy Carlson with an IHS Markit Minute.

Kristen Balasia, Anoop Desai and Thomas Libby talk about how the COVID-19 pandemic has impacted global emissions and fuel regulations, and how regional markets and manufacturers respond to this.

North American auto production is expected to drop to 12.9 million units in 2020. However, the need to replenish inventories and more robust pace of sales is indicating the recovery is stronger than expected. IHS Markit expects North American production will reach 15.2 million units in 2021.

Michael Robinet discusses recent automaker partnerships including two by GM with Honda and Nikola; FCA with PSA; and Ford's alignment with VW.

In this podcast, Stephanie Brinley discusses Jeep's reentry into the full-size SUV segment. On September 3, 2020, Jeep will reveal the new Wagoneer and Grand Wagoneer via virtual events amid the COVID-19 pandemic. The full-size SUV segment has relatively few players. In 2019, this segment accounted for 2.4% of total US light vehicle sales.

US sales figures from July reflect sustained retail sales levels. The outlook for second half of year remains opaque but shows people are willing, able and ready to entertain a new car purchase. IHS Markit upgrades its outlook to 13.6 million units for the full year.

Kristen Balasia, Joseph Kyriakoza and Melanie Erff talk about the accelerated change of automotive retail due to the COVID-19 pandemic impact.