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Global Car Capacity – Does It Fit Perfectly?

We are now heading towards accelerating factory closures as OEMs respond by adjusting the slightly oversized manufacturing footprint, which is the record low for light commercial vehicles (LVs) in the world this century. Do you have?

Indeed, looking back at the last significant downturn in the automotive industry, OEMs took action to cut costs and make up for losses during the financial crisis, resulting in a sharp drop in volume and utilization and increased factory closures. Prompted. In fact, in the worst affected regions of Western Europe and North America, the total number of LV assembly plants in operation fell by 23 between 2007 and 2011, down 12%.

These days, the automotive industry is certainly in a difficult time. COVID-19, the semiconductor crisis, and the war in Ukraine have all played a role in undermining the world’s LV output. From its peak in 2017, global LV production fell by more than 20% last year to just 77 million units, with industry utilization below 55%.

However, in contrast to the financial crisis, supply constraints have led to a shortage of new cars and higher transaction prices, which has led to a surge in OEM margins during this recent recession. This may not be the politically optimal time for OEMs to implement plant closure and rationalization programs, as they will be filled with bumper profits. Nonetheless, the market outlook is weakening, input costs are rising sharply, the challenges of the transition from combustion to electrical technology, and deliberate strategic by some brands to pursue more and more margins than volume. Due to the shift, OEMs may not be able to tolerate such low utilization very long. Global Car Capacity – Does It Fit Perfectly?

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