If the head of the world’s largest electric car maker says he will fire a tenth of its employees because he has a “very bad feeling about the economy,” what does that mean for the rest of the auto industry?
The auto industry has been in turmoil for a few years now: trade wars, a pandemic, strict European emissions standards, computer chip shortages, crippled supply lines, a major supplier invaded by Russia — how many setbacks can the industry take?
Lots, it seemed until recently. Although sales numbers are under pressure, a lot of the industry has managed to maintain profit margins by raising the prices of their cars. After all, scarcity creates desire, and at least some producers have been able to take advantage of that.
So what does Elon Musk suddenly mean? Not only is it the world’s largest automaker by market value, it is also working on all-electric vehicles, the dominant type of powertrain for passenger cars in the coming years. Is Musk’s warning a harbinger of troubled times around the world?
An analyst at Morgan Stanley wrote in an investor note that the musk isn’t just another canary in the coal mine. “Tesla is a lot like a whale in a lithium mine,” he stated, referring to the important raw material for batteries that power electronic cars. If Musk is concerned about the economy, auto investors should expect less prosperous times.
Many other manufacturers seem indifferent. “Demand is very high,” the Nissan CEO said last week. Ford also sees few problems in the US. Some blame the turmoil at Tesla on too rapid growth.
However, the sector’s problems seem to be increasing; Sales of new passenger cars in the European Union fell again in April (by more than 20 percent) due to supply problems due to a lack of chips and a shortage of spare parts due to the war in Ukraine. According to Acea, this was the worst April in living memory. Sales in the US are also declining.
Analysts disagree about the way things are going, with one telling Reuters that “the world of finance and business leadership disagree.” “At some point we’ll know who’s right.”
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