It is a complicated, but interesting, time for the automotive industry. Major automotive players, including OEMs and fleet-management companies (FMCs) are facing multiple colliding challenges and opportunities at once. These include a widespread shortage of new-vehicle inventory due to a global shortage of semiconductor chips, growing pressure to move quickly toward electric vehicles (EVs) from both the U.S. federal government and state governments and the ongoing need to navigate supply-chain delays in this current environment.
As OEMs ramp up vehicle production and get more inventory to market, and FMCs try to find as many new or quality used vehicles as possible to keep fleets in motion, there are many factors at play and affecting their business operations. In addition, new legislation passed in the U.S. could have far-reaching impacts to OEMs, FMCs and other industry players in the months and years to come.
With this in mind, the ACERTUS team has reviewed two U.S. bills that have recently been signed into law – the CHIPS Act and the Inflation Reduction Act – and assessed their impacts on the industry.
The CHIPS and Science Act
In August 2022, President Biden signed the CHIPS and Science Act into law, which will send $52.7 billion to semiconductor-chip manufacturers with the goal of helping to boost domestic production of these chips. The CHIPS Act also includes a 25% tax credit for companies that invest in semiconductor manufacturing through 2026. OEMS and industry suppliers have called for this type of legislation ever since the semiconductor-chip shortage began in early 2020.
Notably, in 2021 alone, 1.5 million vehicles could not be completed as a direct result of the global semiconductor chip shortage. Undoubtedly, OEMs need chip production to ramp up, so they, in turn, can ramp up new-vehicle production to levels that better meet consumer demand and improve car sales. Amid this shortage, OEMs and suppliers have gotten creative, assembling vehicles and sending IOUs to end customers for chips that aren’t critical to a vehicle’s safety or ability to run. Some automakers have also decreased chip standards, so less chips are now required for each new vehicle produced. These moves have provided a little bit of relief in recent months, although they certainly haven’t resolved the larger shortage problem.
Once chip production significantly ramps up, OEMs will need to be prepared to move fast, getting vehicles quickly and efficiently into the markets that need them. To do so, they’ll need access to fast and efficient transport-and-logistics options, as well as strategically located storage sites, so they can temporarily hold or reposition vehicles as necessary before deployment.
Many automakers are pleased the CHIPS Act has now finally passed but realize it will be some time before they see a noticeable increase in available semiconductor chips due to this funding – likely not until later in 2023.
Until then, OEMs still need help moving inventory quickly once it’s ready, especially since much of this inventory is already purchased, and consumers are often waiting multiple months before receiving their new vehicle.
The Inflation Reduction Act
Another piece of legislation signed into law by President Biden in August 2022 is the Inflation Reduction Act, a massive $750 billion investment in climate, healthcare and tax changes. In efforts to address climate change by reducing carbon emissions across the next decade, the Inflation Reduction Act moves the country toward EV ownership. The law removes per-manufacturer limits for the $7,500 tax credits consumers can receive with EV purchases, generally a positive step for EV manufacturers and those automakers already moving in that direction. For the first time, used-vehicle EV credits are also available, up to $4,000, thanks to the law’s passage.
This comes into being at a time when many automakers have already taken major steps toward EV production and innovation. Back in 2021, GM announced that it would sell only EVs by the year 2035, and Toyota has recently announced plans to release 30 EV models by the year 2030.
However, the new law also states that vehicle batteries have to be built or primarily assembled in North America, meaning OEMS will have to quickly change how they approach the EV battery supply chain over the next few years. Automakers like Ford and General Motors lobbied hard against these requirements, but ultimately, they were still included in the final piece of legislation.
These mandates will make producing EVs, manufacturing EV batteries and assembling these vehicles more challenging, especially given the tight stipulations. OEMs will have to rethink much of their supply chain and even speed up some of their already ambitious EV-production goals. As more of the EV supply chain moves to North America in the coming years, logistics will play a critical role in ensuring that supply chain is frictionless and production demands can be met.
In the meantime, OEMs need EV vehicle-transport and logistical support now. While inventory is light due to vehicle-parts shortages (chips are even more critical for battery-powered cars), once vehicles are fully assembled and ready, OEMs must get this inventory moving without delay and to those that need it. To do this, they need access to a reliable logistics team that understands the unique needs of EVs, proper EV transportation and care and how the heavy weight of EVs can impact load factor and capacity levels.
Similarly, a growing number of FMCs need logistical support on EVs. While most FMCs have not yet taken the plunge toward electrifying their fleets, and most of their volume is still heavily fuel-powered, EV orders for fleets are up year-over-year. Although sales fleets, in particular, have not been quick to move toward EVs largely due to the current cost of many of these vehicles, merchant fleets have been more aggressive on EV adoption in recent years.
At the same time, FMCs that provide company-owned vehicles will likely be concerned with these larger industry moves toward EVs, particularly if many of the companies they work with choose to go green or all-electric in the near future. As an increasing number of vehicles become EVs, FMCs will have to rethink their strategies around when and where to charge vehicles, as well as data gathering and fleet-vehicle monitoring – incorporating more reports and insights into battery state-of-charge, battery efficiency, private vs. public charging and electricity rate fluctuations into their overall plans.
While there are many unknowns for FMCs with regard to fleet electrification, many will be pushed toward faster adoption in the next decade, especially if they operate in areas with strict EV requirements. Right now, only California and New York have announced EV-sales deadlines, requiring all cars sold in their states to be electric by the year 2035, but it’s likely other U.S. states will follow.
Regardless of how fast they move toward EVs, or how much of their fleets become electric, FMCs will continue to need fast, efficient and secure vehicle-logistics support to keep their fleet vehicles moving and, as needed, repaired, titled, cleaned and home delivered. Having access to vehicle-logistics support that can cover any vehicle type, including EVs and PHEVs, and can adapt quickly as business needs change will be critical pieces of FMCs’ success in coming years.
ACERTUS as a Trusted Logistics Partner
It’s certainly a challenging time for many in the automotive space. OEMs want to have more access to semiconductor chips, so they can complete new vehicles, whether fuel-based or EVs, more quickly and get them to market. FMCs want to keep fleets updated and in good condition, ensuring their operations stay running smoothly. It’s difficult to know all the many ways the CHIPS and Science Act and the Inflation Reduction Act could benefit or further challenge automotive players in the next few years. The industry hopes the CHIPS Act will benefit new vehicle production, and it’s likely the Inflation Act will continue to spur increased EV production and adoption.
Regardless of the many impacts these new laws have going forward, it’s critical automotive players have a vehicle-logistics partner to assist in gaining the speed, flexibility and reliability needed to be successful.
With a carefully vetted network of more than 8,00 carriers and 1,000 drive-away drivers, ACERTUS is well-positioned to help with both short- and long-distance moves, no matter the vehicle type, route or drop-off location. The ACERTUS team works closely with partners on all orders to ensure they achieve the speed to market they need during this time of low inventory, high demand and supply-chain constraints. As soon as vehicles are ready, ACERTUS’ drivers will collect them and move quickly to get the vehicles to their final destinations on time – whether that destination is a dealership lot, auction site, customer’s home or anywhere else.
The ACERTUS team also has the expertise needed to move EVs and PHEVs safely and securely – something that will become even more important over the next decade as an increasing number of vehicles are electric. Beyond understanding EVs’ heavier weight, load factor implications and how to properly haul these vehicles to maintain safety and compliance with federal regulations, ACERTUS also has EV-charging infrastructure strategically located across North America to keep these vehicles in good condition and ready to move.
In fact, ACERTUS has more than 66 hub-and-field locations, which allow for in-storage maintenance, reconditioning, EV charging and a full suite of other services. While in transit, vehicles can be prepped, cleaned, fueled or charged, titled and then registered, so they’re made fully ready to drive before the final transport.
ACERTUS is the only full-scale, tech-enabled automotive logistics platform that is designed to move, store, recondition, title and register finished vehicles. With one company to handle the entire vehicle journey, ACERTUS’ Strategy dramatically improves speed, efficiency and reliability for OEMs, FMCs and others – turning once-complicated logistics into a true competitive advantage.
Learn more about ACERTUS’ full range of shipping and vehicle logistics solutions at https://acertusdelivers.com. To connect with one of our team members or receive a quote, contact us here or call us at: 855-ACERTUS (855-223-7887).
