“2023 should mark a strong earnings year for the industry, with less volatile raw material costs and a more stable supply chain,” writes Jose Asumendi, Head of European Automotive Research for J.P. Morgan. “Raw material headwinds will slow, eventually providing a tailwind sometime in the second half of 2023. Overall, we predict a strong year for the autos sector, with global car production up 3% year-over-year.”
There is likely to be less earnings volatility in 2023, with original equipment manufacturers (OEMs) maintaining strong pricing power. Equally, more stability should boost the earnings momentum of suppliers and make this a stronger year across the board. “We anticipate tight control over inventories, which maintains pricing power for OEMs and reduces the likelihood of rising incentives,” added Asumendi. “Overall, we expect a more stable pricing environment.” In terms of demand, OEMs expect some normalization, which is not unusual moving away from a period of extraordinary demand and low supply.
They summarise the current picture:
- Some chip shortages could remain through 2023 and into 2024, though supply of semiconductors and raw materials will generally improve in the auto sector.
- The auto sector can expect a strong year in 2023, with global car production – up 3%.
- As semiconductor supply returns, global auto pricing should remain stable.
Europe remains the weakest region for production, particularly compared with North America and China, where there has been stronger recovery post-2020. The region has been the hardest hit by supply constraints linked to semiconductor shortages and the Russia-Ukraine crisis. However, production is showing signs of improvement. “Counterintuitively, we now expect Europe to show the strongest growth rate globally in 2023 — we anticipate 5% year-over-year,” said Asumendi. Strong growth rates in January and February confirm supply chain stability is returning following the constraints of the past three years.
Sandeep Deshpande, Head of European Technology Research, J.P. Morgan, concludes by saying, “We’re nearing the end of the supply crunch after more semiconductor capacity came online in 2022 … Looking ahead, we don’t predict any major constraints.”
To avoid electronics supply-chain disruptions, you may also wish to consult an expert in electronics component supply. With more than three decades of supply-chain expertise, Astute Electronics is ideally placed to work with you on your daily component requirements.
For more help with looking at supply chain options, contact Astute Electronics
