Whatâs Going On Here?Data out on Tuesday showed that European car sales fell for the sixth-straight month in December, and you canât help but feel the regionâs industry has run out of gas. What Does This Mean?Europeâs carmakers still donât have enough chips to keep up production, and their sales are suffering as a result. Just look at Germanyâs stalwarts: Volkswagen, BMW, and Mercedes-owner Daimler sold 30%, 22%, and 15% fewer cars last month than the same time the year before, causing the countryâs overall sales to drop 27%. And since Germany is Europeâs biggest car market, the region saw its sales fall by 22%. Thatâs left carmakers with one option: shift production to higher-end, more profitable vehicles to try to offset some of the damage. Why Should I Care?For markets: Get used to it.
Trouble is, consulting firm EY thinks this year will be as difficult for carmakers as the last, and it might well be right: Chinaâs zero-tolerance Covid policy has already led to factory shutdowns across the country, which produces around a third of all cars globally (tweet this). In fact, two of the worldâs top-selling carmakers â Toyota and Volkswagen â have been forced to halt a few of their production lines just in the last week or so. And thatâs before you get to the minor problem of convincing inflation-hit drivers to open their walletsâŚ
The bigger picture: Once bitten, twice shy.
The absence of new cars might be why the average price of used ones hit $28,000 in the US last month. Thatâs fueling a much bigger problem: the countryâs consumer prices rose 0.5% in December versus the month before, and second-hand cars are estimated to be responsible for at least a fifth of that. America isnât able to unring that bell, but it wonât let it happen again: the governmentâs planning to invest billions into chip production, in hopes thereâll always be plenty of new cars going spare. | 
