As the global economy gradually gets back on track, sales of commercial and personal vehicles are expected to soar. However, given that the auto industry is currently hamstrung by a global semiconductor chip shortage, automakers have been forced to reduce production. While financially sound automakers Honda Motor (HMC) and Mazda Motor (OTC:MZDAY) are uniquely positioned to overcome this challenge and sail through the supply-chain blip, companies like Nio (NYSE:NIO) and GreenPower Motor (GP), with weak fundamentals and growth prospects, will have a harder time doing so and, as such, we think are best avoided now.Auto sales are expected to get a significant boost in the coming months as people continue to avoid public transportation. In fact, optimism surrounding the quick rollout of COVID-19 vaccines and the strength of the economic rebound should lead to a substantial surge in commercial fleet sales. Also, the continued recovery of the new light-vehicle market has also enhanced the growth prospects of the automotive industry.
However, with the demand for semiconductors outstripping the supply, the automobile industry is struggling to increase production. Given inefficient supply chains, even if the industry could get chips to move upstream more quickly, it could take a while for the manufacturers to benefit and increase production and deliver thy of their product. This situation has compelled a few automakers to cut production and even close plants.
Although Honda Motor Co., Ltd. (HMC) and Mazda Motor Corporation (MZDAY) are well positioned to navigate these challenges and capitalize on the industry tailwinds, we think NIO Inc . (NIO) and GreenPower Motor Company Inc. (GP) are suffering from the global chip shortage and could struggle to stay afloat in the near-term.