What’s Going On Here?Data out on Tuesday showed that European car sales fell for the sixth-straight month in December, and you can’t help but feel the region’s industry has run out of gas. What Does This Mean?Europe’s carmakers still don’t have enough chips to keep up production, and their sales are suffering as a result. Just look at Germany’s 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 country’s overall sales to drop 27%. And since Germany is Europe’s biggest car market, the region saw its sales fall by 22%. That’s 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: China’s 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 world’s top-selling carmakers – Toyota and Volkswagen – have been forced to halt a few of their production lines just in the last week or so. And that’s before you get to the minor problem of convincing inflation-hit drivers to open their wallets…
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. That’s fueling a much bigger problem: the country’s 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 isn’t able to unring that bell, but it won’t let it happen again: the government’s planning to invest billions into chip production, in hopes there’ll always be plenty of new cars going spare. | 