From small auto manufacturing companies to big conglomerates, all automakers are struggling to maintain their production volume due to a global semiconductor chip shortage. While some fundamentally sound companies, such as Volkswagen (DE:VOWG_p) (VWAGY) and Daimler (OTC:DDAIF), have sufficient warehouse stocks and supply chains to survive the shortage, weak players, such as XPeng (XPEV) and Li Auto (LI), are struggling to stay afloat. Let’s look closer at each name.With the reopening of factories and resumption of production worldwide, the auto manufacturing industry is back in business this year from its forced, COVID-19-driven hiatus. Buoyed by a pent-up demand for personal vehicles and a growing interest in electric vehicles (EVs), the industry has seen a significant increase in sales so far this year. In fact, the global automotive aftermarket is expected to grow at a 3.8% CAGR of 3.8% over the next seven years to hit $529.25 billion by 2028.
However, the automobile industry has been facing a serious problem. A global semiconductor shortage has forced automakers to cut production and idle plants. Given that the shortage is expected to last at least until year’s end, many auto manufacturers have been hoarding their chips on hand for their expensive models.
Volkswagen AG (OTC:VWAGY) and Daimler AG (DE:DAIGn) (DDAIF) have managed to overcome the shortage issue by diversifying their supply chains, scaling up production, and maintaining a good warehouse of the required components. So, we believe these two stocks should continue to be strong performers this year. Conversely, XPeng Inc. (XPEV) and Li Auto Inc. (LI) are struggling to stay afloat due to the chip shortage and to weakness in their financials. So, we think these two stocks will witness further declines.