2023-09-01 16:12:26
Times are tough for those looking to buy a new car. In recent months, the average price of a car in Europe has reached 30,000 euros, so it is understandable that many people find it difficult to replace their old car. But what might be behind the drastic price increase? There is something that doesn’t add up, and it’s what Ernst and Young also pointed out: the financial results of the auto industry show record margins in recent months. The companies announced price increases one following the other due to the Covid pandemic, the chip crisis, the outbreak of the war in Ukraine and the increase in the price of energy carriers. In the meantime, they generate amazing revenue and operate at brutal margins despite car sales plummeting since the pre-Covid era and European dealerships only seeing some recovery in recent months. “The world’s largest car manufacturers are still on a growth path,” E&Y points out. “The sales of the 16 largest car manufacturers rose by 18% in the second quarter, reaching a new high. Total profit increased by 31%. This is a new record”. In terms of margin, Stellantis (producer of Fiat, Jeep, Citroen, Opel and Peugeot) leads by more than 14 percent ahead of Mercedes, Kia and BMW. But analysts say inflation might hit the manufacturing world in 2024, ending this year’s record profits. “Most companies managed to maintain high profitability once more. However, we will have to see how the market develops. Because once orders from the chip-free days are fulfilled, automakers face a new reality: economic weakness, falling demand, price pressure, overcapacity. It will become more and more difficult for car manufacturers to impose high prices on the market and offer discounts,” says Constantin M. Gall, managing partner and head of mobility for EY’s Western Europe region. And on top of all this, there is even the problem of electric cars: “Demand for electric cars is far from as strong as hoped,” concludes Gall. It seems that Tesla is the only car manufacturer that announced a price decrease instead of a price increase. Elon Musk previously said: “we might sell the cars at cost price”.
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