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Jalopnik: “The car shortage is about to get a whole lot worse”

Themistocles

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I have checked this story with multiple different reporting agencies. Seems to be valid. It appears that the electricity shortage in China is impacting Chinese output of Magnesium and that global and U.S. aluminum suppliers are warning that if the shortages continue they will not be able to meet CY22 orders....how far they will be below requirements I have not yet found.

A little background, if anyone cares to read it. China has purposely grabbed markets on things like this (rare earths is another). They use government subsidies (of some form) to produce at or below cost. The result is that companies in other countries can't compete unless their own governments step in to help. In a state like China that is easy, in the U.S. or Europe for example it is much much less easy for the government subsidize a company...though their are certainly ways to do it. In the end most non-China companies just fold because buyers go to the cheapest source and that source is China. This exactly what happened with rare earths (U.S. used to be one the top producers in the world...we now produce almost none, despite having large deposits.) Looks like what likely happened with magnesium.

This gives China lots of leverage. They used that leverage over rare earths a few years ago when they got in a dispute with Japan...just about shutdown a few major Japanese industries. While the slow down of production may be totally a byproduct of poor electrical planning and bad luck/timing, I wouldn't put it past China to slow down production of some things more than others in order to send a message. As the situation with Taiwan heats up and our dispute with China deepens, a few sharp messages about how much we depend on China might seem like a good idea to Chinese policy makers.

I personally don't see things improving real quickly, and would be far from surprised if they got worse, maybe substantially worse. The lack of fab (chip foundry) capacity in the U.S. is another one that could be very painful. In the end we need to be reshoring many of these industries or looking for partners in Canada, South America, or Europe...partners we can count on and we need to be ok with providing long-term market protection for these industries. Because without that China can just drop prices and kill the market again, causing everyone else to go out of business. As long as that situation exists, even if there is a short term demand, it doesn't make sense to invest substantial money into domestic / non-Chinese capacity.

Bottom-line, this isn't the first and likely wont be the last issue like this...return to your seats, stow your luggage, and buckle up, could be a bumpy ride.
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LooselyHeldPlans

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couldn't set the gap on a points distributor to save their worthless soul
How is that a measure of anything? LOL! I bet they can't even replace a broken spoke on a wagon wheel!
 

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LarryB

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the biggest problems right now are the supply chain and the chip shortage. However, the sheer size of the automakers means they are near the top of the food chain on just about everything. So, if there were a shortage on certain metals, it would be harder to get a new BBQ or fridge, but not as much cars.
 

omnitonic

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Bunch of woke kids that couldn't set the gap on a points distributor to save their worthless soul. Quit reading that site a long time ago.
In their defense, I've never actually owned anything that didn't have HEI, and I don't even know what "woke" means. I think it's modern lingo for what we used to call a douche bag, but I'm not totally sure. I haven't been bothered to look it up.
 

MSparks909

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In addition to the looming commodities crisis on the near horizon, I think it would be prudent to pay attention to China’s stumbling real estate market. 25% of their GDP and many companies are teetering on the verge of default due to over-leveraging. Sound familiar to anyone? 2008’s knocking again unless Beijing does a massive bailout and so far they haven’t budged. Could be a very bumpy year next year indeed not just for auto industries but everything…
 

csjlu

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the biggest problems right now are the supply chain and the chip shortage. However, the sheer size of the automakers means they are near the top of the food chain on just about everything. So, if there were a shortage on certain metals, it would be harder to get a new BBQ or fridge, but not as much cars.
I agree, especially with 1/3 of aluminum sheet usually going to automakers. But in the short term, companies with strong pricing power that can pass along higher input costs to buyers likely get priority. I'm thinking of companies like Apple, since their unit volumes are still sky high, their products carry lower average selling prices, and customers do not negotiate iPhones or Macs down to 13% below MSRPs.

Although I love Wranglers, the profit margins at Jeep suggest it is more of a price-taker than price-setter, and the current pricing strength it is benefitting from is more attributable to short-term demand stimulus and an industry-wide supply bottleneck.
 

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Hennessey17

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In their defense, I've never actually owned anything that didn't have HEI, and I don't even know what "woke" means. I think it's modern lingo for what we used to call a douche bag, but I'm not totally sure. I haven't been bothered to look it up.
"Woke" is a dismissive, belittling term people on the right use to call people when they don't believe in a view. And obviously people on the left have their dismissive, belittling terms as well. Neither solve anything, and is clearly not interested in solving anything.
 

omnitonic

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...The right use to call people when they don't believe in a view. And obviously people on the left have their dismissive, belittling terms as well.
See, now I understand why I didn't know the term. The roads I prefer to drive on are too narrow for any path except the one that minimizes pinstriping. There is no left, no right, no center; only the one path. Rich or poor, big tires or stock, new Jeep or crappy old Toyota, the rule I use is that the driver who can do the least damage to the habitat beside the road while avoiding precipitous drop-offs and tree trunks is the driver who should yield.
 

Shiner

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All this back and forth about magnesium, like that’s the backing to a true or untrue of this article… I’m going with true and still not grasping the totality of the hardships ahead. Not only for the auto industry, but for many other industries. 2020/2021 are literally like that small wave that surprises you before the massive tidal wave comes crashing down. Sorry if you don’t agree, but if you’ve got any grasp on reality, you’ll piece the pie together as well. And trust me, I’d LOVE to be wrong about this, but I’m certainly not counting on that
Yeah... I wish you were wrong, but I don't think you are
 

chilly_one

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I can't comment on the accuracy of Jalopnik's or Barclays' forecasts, but I can tell you that the car shortage is real. We were looking for looking for a new 4Runner for my wife, so I was looking at the Koon's Toyota website. Having looked at 4Runners there before, they used to be about $3k-$4k under sticker. Yesterday, they were showing prices of about $8k over sticker. That's a big swing in pricing, and means I won't be buying a new 4Runner anytime soon.
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