12-26-2021 , 04:01 AM
https://timesnewsexpress.com/news/busine...ion-falls/ German carmakers enjoy record prices for luxury models as production falls
40 mins ago
Germany’s premium car manufacturers enjoyed record high prices for their luxury models in 2021 as a shortage of semiconductors restricted the supply of vehicles to major markets just as consumer demand was soaring.
Revenues per car at BMW, Audi and Mercedes-Benz increased by an average of almost 25 per cent when compared to pre-pandemic 2019, analysis carried out by Stifel bank for the Financial Times has shown.
The increase has been caused by a reversal of a decades-long trend, in which the industry produced more cars than it sold. Carmakers then offered ever higher discounts to push excess cars on to forecourts, so that sales volume targets could be reached in time for accounting deadlines.
Since 2019, when the global economy weakened, manufacturers have begun to make fewer cars than they can sell, with the gap widening to roughly 4m vehicles this year. Although there was a similar deficit following the financial crisis in 2009, it was an anomaly amid years of overcapacity.
“We’ve seen an inventory reduction for three years, driven by [restricted] supply,” said Daniel Schwarz, an analyst at Stifel. “That has not happened before.”
As a result, revenues at Mercedes-Benz have risen from almost €38,000 per car in 2019 to more than €54,000 in 2021 up to the end of the third quarter, while Audi’s has increased from more than €46,000 to approximately €57,500, according to Stifel’s calculations.
BMW, which has managed the chips crisis better than its peers, and lost less production time overall, experienced a more modest rise, from just over €36,000 per vehicle in 2019 to more than €38,000 in 2021 up to the end of the third quarter.
Much of this has been achieved by manufacturers prioritising the production of more profitable models.
Sales at Mercedes, for example, were down 30 per cent in the three months to the end of September, but revenues were down just 1 per cent.
Analysis by Stifel shows that in just one quarter, Mercedes’ earnings before interest and taxes were boosted by €1.4bn merely by better pricing and by putting available chips into higher-end, higher-margin vehicles.
With investors noticing the change, executives say they will continue to pursue this strategy even when supply constraints ease.
“There is no pressure to chase volume,” Ola Kallenius, Mercedes boss, told the Financial Times this month, while Harald Wilhelm, chief financial officer, pledged to “focus on where the money sits”.
“This overriding strategy of not looking downwards in [market] segments where we are but looking upwards, that will continue,” Kallenius added.
Luxury carmakers were also helped by record rises in second-hand car prices. This has not only made buying new cars more attractive, but has boosted the balance sheets of the premium manufacturers’ finance arms, which run large leasing businesses.
“The cars are being returned [to the manufacturer] after 12-36 months and the re-sale price is much higher than initially assumed,” said Schwarz.
“From a short-term perspective, the lack of new cars today will make used cars scarce for at least the next two years,” he added. “That should support the pricing for new cars, too.”
40 mins ago
Germany’s premium car manufacturers enjoyed record high prices for their luxury models in 2021 as a shortage of semiconductors restricted the supply of vehicles to major markets just as consumer demand was soaring.
Revenues per car at BMW, Audi and Mercedes-Benz increased by an average of almost 25 per cent when compared to pre-pandemic 2019, analysis carried out by Stifel bank for the Financial Times has shown.
The increase has been caused by a reversal of a decades-long trend, in which the industry produced more cars than it sold. Carmakers then offered ever higher discounts to push excess cars on to forecourts, so that sales volume targets could be reached in time for accounting deadlines.
Since 2019, when the global economy weakened, manufacturers have begun to make fewer cars than they can sell, with the gap widening to roughly 4m vehicles this year. Although there was a similar deficit following the financial crisis in 2009, it was an anomaly amid years of overcapacity.
“We’ve seen an inventory reduction for three years, driven by [restricted] supply,” said Daniel Schwarz, an analyst at Stifel. “That has not happened before.”
As a result, revenues at Mercedes-Benz have risen from almost €38,000 per car in 2019 to more than €54,000 in 2021 up to the end of the third quarter, while Audi’s has increased from more than €46,000 to approximately €57,500, according to Stifel’s calculations.
BMW, which has managed the chips crisis better than its peers, and lost less production time overall, experienced a more modest rise, from just over €36,000 per vehicle in 2019 to more than €38,000 in 2021 up to the end of the third quarter.
Much of this has been achieved by manufacturers prioritising the production of more profitable models.
Sales at Mercedes, for example, were down 30 per cent in the three months to the end of September, but revenues were down just 1 per cent.
Analysis by Stifel shows that in just one quarter, Mercedes’ earnings before interest and taxes were boosted by €1.4bn merely by better pricing and by putting available chips into higher-end, higher-margin vehicles.
With investors noticing the change, executives say they will continue to pursue this strategy even when supply constraints ease.
“There is no pressure to chase volume,” Ola Kallenius, Mercedes boss, told the Financial Times this month, while Harald Wilhelm, chief financial officer, pledged to “focus on where the money sits”.
“This overriding strategy of not looking downwards in [market] segments where we are but looking upwards, that will continue,” Kallenius added.
Luxury carmakers were also helped by record rises in second-hand car prices. This has not only made buying new cars more attractive, but has boosted the balance sheets of the premium manufacturers’ finance arms, which run large leasing businesses.
“The cars are being returned [to the manufacturer] after 12-36 months and the re-sale price is much higher than initially assumed,” said Schwarz.
“From a short-term perspective, the lack of new cars today will make used cars scarce for at least the next two years,” he added. “That should support the pricing for new cars, too.”