The Car Market
Although the automotive industry faced a dip that started in 2020, innovative directions among car manufacturers seem to point to exciting prospects for the future of the industry. In fact, ResearchAndMarkets.com reports that the global automotive market is expected to go from $35.7 billion in 2021 to being worth $49.4 billion by 2027 — showing a CAGR of 5.20% over five years.
If you’re an investor looking to expand your portfolio, then the automotive industry is worth considering. Here’s what you need to know about how the car market is doing, and what’s ahead for investors.
The car market’s performance
Global disruptions in 2020 have challenged the car market with persistent supply chain issues. Among the factors contributing to these disruptions is the Russo-Ukraine conflict. Around 50% to 70% of the world’s neon gas supply comes from Ukraine. The substance is integral to making semiconductor chips, and securing new sources of neon gasses may take time. There are also microchip shortages attributed to bottlenecks at Chinese ports, as well as labour negotiations at US ports.
As car manufacturers encountered difficulties in production, they raised prices to compensate for the lost volume. And while the current performance of the car market may seem dim, this might not be completely bad news for investors, especially if you have a long investment horizon.
Rising trends in the car market
Despite these challenges, the demand for cars perseveres. In fact, Sound Dollar states that average auto loan balances have increased 75% since 2003, rising from $2,960 to $5,210. Despite rising costs, these numbers illustrate the sustained demand for automobiles, even going so far as to revitalize the used car market.
Car companies have also had to adjust to changing consumer values and purchasing capabilities, as a result of manufacturing shortages. This results in a great outlook for electric cars in particular. Because of shifting preferences towards alternative power sources — due to both preference for sustainability as well as spiking gas prices — many established automobile companies are now releasing their own electric models. This includes the Ford Mustang Mach-E, Hyundai’s Ioniq 5, and the Nissan LEAF.
That some of the world’s most trusted car manufacturers are now delving further into electric is a good sign of their dedication to future-proofing their companies. The future of automobiles could be very profitable as the industry adapts positively to the demands of today’s most pressing issues.