Luxury German cars rise to record highs in 2021

Germany’s premium car manufacturers enjoyed record-high prices for their luxury models in 2021 as a shortage of semiconductors restricted the supply of vehicles to major markets just as consumer demand was soaring, Report informs referring to Financial Times.

Revenues per car at BMW, Audi and Mercedes-Benz increased by an average of almost 25 percent when compared to pre-pandemic 2019, analysis carried out by Stifel bank for the Financial Times has shown.

The increase has been caused by a reversal of a decades-long trend, in which the industry produced more cars than it sold. Carmakers then offered ever higher discounts to push excess cars on to forecourts, so that sales volume targets could be reached in time for accounting deadlines.

Since 2019, when the global economy weakened, manufacturers have begun to make fewer cars than they can sell, with the gap widening to roughly 4m vehicles this year. Although there was a similar deficit following the financial crisis in 2009, it was an anomaly amid years of overcapacity.

“We’ve seen an inventory reduction for three years, driven by [restricted] supply,” said Daniel Schwarz, an analyst at Stifel. “That has not happened before.”

As a result, revenues at Mercedes-Benz have risen from almost 38,000 euros per car in 2019 to more than 54,000 euros in 2021 up to the end of the third quarter, while Audi’s has increased from more than 46,000 euros to approximately 57,500 euros, according to Stifel’s calculations.

BMW, which has managed the chips crisis better than its peers, and lost less production time overall, experienced a more modest rise, from just over 36,000 euros per vehicle in 2019 to more than 38,000 euros in 2021 up to the end of the third quarter.

Much of this has been achieved by manufacturers prioritizing the production of more profitable models.

Sales at Mercedes, for example, were down 30 percent in the three months to the end of September, but revenues were down just 1 percent.

Analysis by Stifel shows that in just one quarter, Mercedes’ earnings before interest and taxes were boosted by 1.4 billion euros merely by better pricing and by putting available chips into higher-end, higher-margin vehicles.