BMW shows that chips shortage a double-edged sword for vehicle makers, says GlobalData

Following the news that BMW has raised its financial results guidance for the 2021 financial year;

David Leggett, Automotive Analyst at GlobalData, a leading data and analytics company, offers his view;  

“Car companies are getting a bottom-line lift on recovering vehicle markets and high margins on sales – especially in North America, but also Europe and China. Company cost bases have also been contained through the pandemic; higher volumes sold this year versus last year have quickly inflated revenues and operating profits.

“High-margin premium brands are doing particularly well – like BMW and Mercedes-Benz – and looking around the world, new car transaction prices are currently extremely high in the US. It’s a very good time to be selling new cars and trucks there – if you can supply them to market.

“The chips shortage is something of a double-edged sword. Besides lifting transaction prices for vehicles sold in the short-term, it is also forcing companies to take a serious look at their supply chains with respect to transparency and risk mitigation strategies – a positive for the longer-term.

“There are tougher times ahead for the industry though, with some uncertainty over transaction prices and demand as the global economic rebound slows. Automotive company margins will also start to be squeezed by higher costs, particularly investment in electrified vehicles, as well as the ongoing effects of supply chain disruptions.

“The big swing to demand recovery from last year’s extremely low base has now largely completed its initial surge and we see a slightly declining global automotive market in the second half of this year.

“GlobalData’s world light vehicle sales forecast for the year has recently been downgraded to 81.7 million, an 8% increase on pandemic-ravaged 2020 but still well below pre-pandemic markets of over 90 million a year.”

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