Automakers Post Solid Earnings, Uncertainty Continues

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stellantis Jeep Grand Cherokee in a brick building
Stellantis reported a 46% revenue increase since January with particularly strong margins in North America due to demand for trucks and Jeep SUVs. PHOTO Stellantis

Several OEMs, including BMW, Stellantis, General Motors, Toyota and Ford Motor Company have reported strong earnings for the first half of 2021.

Since the merger between PSA and Fiat Chrysler to create Stellantis was officially announced in January, the company reported a revenue increase of 46% to $89.3 billion U.S.

In North America, margins were particularly strong with a 16.1% increase fueled by hot demand for trucks and Jeep SUVs.

Strong earnings

General Motors also reported strong earnings in the second quarter of 2021, witnessing revenues of $34.2 billion and a net income of $2.8 billion, which compared strongly against the same quarter in 2020 when the company witnessed revenues of $16.8 billion and a net income loss of $0.8 billion.

Toyota also saw strong numbers during its first quarter of 2021, with global vehicle sales increasing by approximately 990,000 units to 2,148,000 vehicles. Net revenue also increased during the same period by 72.4%, totalling $72.1 billion or 7.935 trillion yen.

Ford Motor Company also posted better than expected earnings during Q2, delivering a profit of 13 cents per share and revenue of $24.13 billion, despite having to cut back vehicle production by some 700,000 units due to the semiconductor shortage.

BMW reported a net profit of $5.7 billion (4.8 billion) during Q2 and has raised its profit forecast for the year.

More volatile

Yet despite these strong performances, there is a consensus that the second half of the year is likely to be more volatile for the automotive industry which could negatively impact earnings.

Raw material shortages continue to be an ongoing challenge in the auto sector and many other industries, with BMW saying that a lack of semiconductors could curtail production by as much as 90,000 units this year.

General Motors, which saw truck production recently resume, is shutting down plants again as the semiconductor shortage continues to bite. The company said that it will be suspending assembly again at its Flint, Michigan, Fort Wayne, Indiana and Silao, Mexico facilities.

Additionally, GM’s Lansing Delta Township, Michigan, San Luis Potosi, Mexico and Ingersoll, Ontario assembly plants have seen their downtime extended, with the latter two through the weeks of August 23 and August 30 respectively.

Difficult situation

With modern vehicles requiring multiple chips to power various sensors and functions, plus a reliance on older generation chips which are considered less profitable for semiconductor manufacturers, several automakers are finding themselves in difficult situations.

And with pressure from other industries for semiconductors and trends that point to an ever-greater demand and reliance on technology for home and business use, it is unlikely the situation will improve until well into next year.

To help combat the problem, existing chip makers have been ramping up production, while governments have also pledged support and subsidies for local semiconductor production.

In the U.S., the Senate has passed a $250 billion bill (the U.S. Innovation and Competition Act), aimed at spurring domestic semiconductor R&D and manufacturing, though it is still likely to be some time before the influence of this initiative is felt, both within the automotive sector and the wider economy.



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