Active suspension // While passenger car sales slump, EV technology and aftermarket demand inch forward

Passenger vehicle sales in the U.S. were already falling in 2017, 2018 and 2019. Through the first eight months of 2020, new light-vehicle sales were off by 20.7 percent compared with the same period in 2019, says Patrick Manzi, chief economist for the National Automobile Dealers Association. Cox Automotive Senior Economist Charlie Chesbrough points to COVID-19, civil unrest and continued unemployment as causes for the latest downtick. “The auto market will have some major obstacles that will slow the V-shaped rebound we had all hoped for,” he said.

CEP Technologies President Ken Kaufmann Jr. is hearing a similar story from his customers. The Tier 3 supplier produces miniature and small progressive stampings for automotive OEMs and makes ignition terminals for the industry’s aftermarket. “The automotive industry has a long road ahead in terms of recovering sales volumes,” he says. “I anticipate it will be at least 2025 before we hit the numbers we saw after the Great Recession.”

Electric vehicles

There is reason for optimism, though. Greentechmedia reported that carmakers like Volvo, Volkswagen and General Motors have “re-emphasized a commitment to vehicle electrification in recent weeks.” During a September press call, GM Vice President of Electric and Autonomous Vehicles Ken Morris said, “Product development work on the company’s future EV portfolio is progressing at a rapid pace despite the pandemic.”

Bloomberg New Energy Finance anticipates that electric models will “account for nearly 60 percent of all new passenger car sales worldwide by 2040.” The International Energy Agency’s Global EV Outlook 2020 report noted that while global sales of passenger cars in 2019 was sluggish, “electric cars had another banner year.”

“EV technology is finally going mainstream,” Kaufmann says. “With the commitment from the major automotive manufacturers, we are starting to see EV technology hitting the marketplace. Even though mainstream media only talks about Tesla, all the majors are bringing their own platforms to the marketplace.”

The pandemic, which brought commuter traffic down dramatically during the middle of 2020, is fueling a growth spurt in do-it-yourself projects and purchases for the automotive aftermarket space, NPD Group Inc., a market research firm reported in August 2020.

“People are buying items and working on car projects or performing their own routine maintenance,” Kaufmann says. “We’ve seen growth in this market space through the automotive ignition terminals we supply. We deal heavily in aftermarket, which has helped us offset the revenue decline in the OEM business created by the pandemic.”

CEP is seeing growth abroad. “We’re getting a boost in business from China,” Kaufmann says. “China has rebounded from the pandemic considerably better than the U.S. We’re seeing a greater number of new automotive projects come out of Asia than North America right now. Much of this business is OEM-driven.”

On the materials side of the equation, Kaufmann has seen steel prices drop while copper continues to hold its own. “Right now copper is about 8 percent higher than it was at the beginning of the year, which is significant when you consider the effects of COVID-19 and how far off production levels are. Material sourcing lead times, however, have been impacted. Currently we’re seeing an increase of four to six weeks.”

As the market’s supply chain continues to take baby steps forward, Kaufmann has one other piece of advice. “A diversified portfolio can help companies weather these types of events,” he notes. “Being a fiscally responsible company allowed us to build our inventories during the shutdown to support customers once the economy reopened. A supplier who can readily secure material and make parts is critical to helping manufacturers survive during times like these.”