Auto Stocks Defy Cratering Sales. Surge in Value

If you wanted more proof that the stock market is a horrible indicator of how the global economy is doing, we gladly invite you to have a look at the state of automotive stocks in 2021, as they defiantly skyrocket in spite of a global health crisis and chip shortage leaving the industry in chaos.
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A CNN Business report on Monday detailed how recent announcements by GM, Stellantis (owners of Chrysler), and Honda despairing over plummeting sales over the last three months had failed to even make a dent in their stock value. In stark defiance of an industry seemingly on the brink of collapse.

Experts say this unexpected surge in car stocks comes from massive investments in the industry in all-electric drivetrains, technology that investors believe has huge potential for future growth post-chip-shortage.

Automakers from the U.S, to Germany and Japan, have all pledged to invest tens of billions into electric vehicle research and development in the last year alone. It’s a direct influx of cash that at least in the short term is keeping the auto industry stocks from entering an uncontrolled freefall.

What happens after this direct investment into the industry runs out can not be said for certain. Investors can and have funded their way out of slumps in the past, most notably during the two most recent recessions.

But with no clear path out of the chip shortage at least until the end of next year, the more time wasted is more money hemorrhaging from carmakers who’ve seemingly run out of solutions, or at least that’s the public perception.

At day’s end, automakers exist for one purpose: to sell people like us vehicles we want to buy. Without some solution to the chip shortage that isn’t just a short-term band-aid job, it’s more than likely this sustained stock growth of recent is bound to come crashing down. The only question is when.
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