The supply chain crisis and chip shortage might have wreaked havoc over the automobile industry, but universally not so.
This led to prices to boost for premium cars, especially ones released by Audi, BMW and Mercedes. Premium car manufacturers, especially ones from Germany have enjoyed a record height of prices for their premium models in 2021.
This is amidst soaring consumer demands. The revenues per car from these manufacturers have increased by an average of 25% compared to pre-pandemic levels.
The main reason for this trend is a reversal of a decades-long trend. The trend is making more cars than sold. Then they would offer higher discounts to sell these cars, just in time to meet the deadlines.
Since the economic slowdown, only a few cars were made that would sell. Even though there was a similar situation in 2008, this was different, with only 4m vehicles produced this year. There was an inventory reduction but this scarcity is new.
Because of this, the revenue of Mercedes Benz rose from €38,000 per car in 2019 to €54,000 in 2021 in the third quarter. A similar fortune can be told for Audi as it rose from €46,000 to €57,500. All of these are approximate numbers.
To make matters more favourable for them, BMW has managed their chip crisis far better than others and overall lost less of their production time.
They even experienced a moderate rise of €36,000 per vehicle in 2019 to more than €38,000 in 2021.
That is achieved by the producers concentrating on profitable models’ production. For example, Mercedes sale was down by 30% from June to September, but revenues were just down by 1%. A recent analysis by Stifel asserts this fact.
According to the report, the earnings of Mercedes before interest and taxes were boosted by €1.4bn. That was boosted by better pricing and using available chips into higher-end, higher-margin vehicles.
This has attracted the investors, which made executives decide between continuing this process even if the supply chain crisis eases. They prefer quality and profit over quantity.
It also boosted the balance sheets of the premium manufacturers’ finance arm.
Another boost for their trade came an unexpected place, the rise of second-hand cars prices. People approach second-hand cars for a cheap alternative, but the rise of their prices made them consider buying an original one.https://www.pymnts.com/news/investment-tracker/2021/state-owned-entities-backing-most-of-3-5b-for-mas-finance-arm-chongqing-ant/
After 12-36 months, cars are being returned with a re-sale price much higher than expected.
Even the lack of new cars is good since it would make used cars scarce for two years and in turn support the pricing of the new cars.
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