What does the future hold for the car industry?

Supplies to companies’ production chain will continue to be challenged, as there are still long delivery times on important components (not just semiconductors; now also wire harnesses). Furthermore, there are labour shortages in many markets, including the car and transportation industry, which exacerbates the delivery situation in the companies’ supply chain. It is expected that more industries will be affected by this, including agricultural and financial industries. To make things worse, inflation is likely to worsen in Europe and North America, and thereby make the challenges in the supply chain more expensive.

Oil and gas prices have risen dramatically, and therefore putting more focus on renewable energy. Governments and private businesses are looking to renewable energy as the solution to the challenges that they are facing. It cannot be ruled out, that an effect of this, is an increased interest for electric vehicles, and that companies will accelerate the transition to having fully electric car fleets.

If you are concerned about energy prices rising even more, it pays to be prepared to the following:

• Plan for a world where fuel prices remain high for some time (at least two years)
• Plan your transition to renewable energy sources, especially electric vehicles (EVs)

Due to the Covid-19 pandemic, we saw consumer behaviours change: demand for services dropped while demand for goods rose. Especially one car component became a point of interest in the demanded goods: the semiconductor. These are necessary in a car’s electricity. The production of semiconductors to cars has been greatly reduced, as car production went into a standstill due to reduced or cancelled orders, as the world went into lockdown in 2020. At the same time, manufacturers of semiconductors received more orders from the consumer electronics industry. As many people began to work from home, the demand for screens, computers, cameras, televisions, but also game consoles and smartphones rose.

Today, there is still a lack of semiconductors for cars. This is one of many factors that is challenging the delivery situation for car manufacturers, as they have to deliver cars to car dealers and companies. That is why, you can expect longer delivery times on new cars. However, the world is looking at an increased production of semiconductors to cars, and with time, we can look forward to more normal delivery times.

Higher costs for vehicle parts and materials, combined with the demand for new vehicles, are driving an increase in prices for both new and second-hand cars. For new small vans and passenger cars, we have seen price increases of 5.71% in the first three months of 2022. For larger vans, that figure climbs to 6.74%.

While the situation is changing on an almost daily basis, LeasePlan is continuously monitoring government regulations, the capacity of our supplier network and the availability of spare vehicle parts.

We are continuing to perform normal vehicle service requests and activities like repairs and technical inspections. By working with our supplier network, we have also ensured that preventive measures – including extra vehicle sanitation processes – are in place to protect our customers.

In the coming year, we will continue to provide our clients with regular, up-to-date, and proactive advice to help you steer through the continuously changing economic landscape. Reach out to your LeasePlan contact for more information.

Good advice for fleet managers:

• Order your new cars as early as possible - ideally 9-12 months prior to end of existing contract
• Accelerate the transition to electric vehicles - car manufacturers prioritize the production of electric vehicles