How have EU Autos performed since the Pandemic Began?
Since Covid-19 began, shares of EU Auto OEMs (+35%), Global Tyres (+44%) and Global Trucks (+19%) have all outperformed the European Index (+17%), while EU suppliers have underperformed (-3%). Secular dynamics continued to boost Premium OEMs, Tyres, and Trucks over mass-market OEMs and pure-play Auto suppliers. Shares of EU OEMs (+55%) are especially benefiting from strong price/mix, special situations, and EV announcements. Tyres continue to benefit from being decoupled from auto production and tier 1 players in particular, from the strong pricing environment. As a result, RBC Capital Markets continues to favour premium Auto OEMs and believes the current inflationary environment will persist in H1/22 given chip issues.
Global Auto Production Forecasts
RBC Capital Markets is still cautious on auto suppliers given that better retail pricing goes to the OEM and lowers its Global Auto Production forecast slightly for 2022/2023 (by 0.3/0.5m units). For 2022, it forecasts semis to continue to weigh on global, low volatility portfolios (LVP) through at least H1/22, limiting the ability to fully recoup the lost units in 2021 (~9.5M units). However, RBC Capital Markets expects a full recovery to come by 2023 where it forecasts global auto production will reach 2019 absolute. For global light vehicle production, RBC forecasts growth of +9.2%/+8% y/y in 2022/2023, and global production to reach 2019 levels (~89m) by 2023. For 2022, it now estimates global LVP of 82.4 mm, in line with IHSM’s 82.3mm.
Semiconductor impacts to gradually improve later in 2022
RBC Capital Markets expects semis to weigh on global LVP through at least H1/22, limiting the ability to fully recoup the lost units in 2021 (~9.5M units). It thinks H1/23 will see improvement and incremental capacity with supply chain starting to keep up with demand, while missed backlog will start to be made up in H2/23. RBC Capital Markets thinks semiconductor shortages will stabilize in H2/22 but will likely take until Q4/22 or 2023 to return to normalized levels. It notes that relative to its 2021 share of global LVP, North America experienced the largest impact from semi-shortages, accounting for >25% of the total production shortfall in 2021, followed by Europe at 25%, while China was impacted less compared to its 2021 production share.
Truck market forecasts
RBC Capital Markets forecasts Europe HD Truck sales to be +7%/+11% y/y in 2022/23 and NA to be +12%/+19%, in line with ACT’s January 10 release which is calling for NA Cl- 8 sales growth to +12%/+19% in 2022/23. It also expects Europe/NA truck sales to peak in 2023 while China HD truck sales could be down 33% in 2022 and up 7.4% in 2023.
