{"id":5768,"date":"2023-05-08T11:53:33","date_gmt":"2023-05-08T15:53:33","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/rosy-scenario-for-europes-carmakers-likely-to-stumble\/"},"modified":"2023-05-08T11:53:34","modified_gmt":"2023-05-08T15:53:34","slug":"rosy-scenario-for-europes-carmakers-likely-to-stumble","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=5768","title":{"rendered":"Rosy Scenario For Europe\u2019s Carmakers Likely To Stumble"},"content":{"rendered":"
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Auto sales and manufacturers\u2019 profits in Europe have been bounding ahead, but investors worry that a faltering economy and a price war initiated by electric vehicle maker Tesla may also infect the traditional combustion sector and end the positive scenario.<\/p>\n

The profitability of high-end manufacturers like BMW, Mercedes and Volkswagen\u2019s Audi and Porsche subsidiaries have benefitted from a combination of events. The shortage of semiconductors may have depressed production, but strong demand has allowed them to sell more highly profitable sedans and SUVs and end up making even higher overall profits. Some mass vehicle manufacturers have followed a similar path, but higher interest rates have weakened demand and the slowing economy is undermining sales.<\/p>\n

The supply chain that was wrecked by the Covid pandemic has largely been restored, but now demand is faltering. Prices and therefore profits are likely to come under pressure as carmakers scramble to find buyers for their products.<\/p>\n

S&P Global Ratings said in a recent report that what it called positive momentum in European sales could falter in the second half of 2023 as the economy weakens and tighter monetary policies undermine consumer purchasing power. S&P Global Ratings expects stagnation in Europe this year.<\/p>\n

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LMC Automotive points out that despite strong Western European sales so far this year and an 8% increase expected for 2023 to 10.96 million, the market is still significantly below the 14.29 million achieved in pre-Covid 2019.<\/p>\n

\u201cMost markets in the region are still significantly below pre\u2010pandemic 2019 levels. As such, we expect to see further improvements in selling rates as supply picks up. While underlying demand has taken a hit from rising interest rates and slowing economic growth, on a more positive note, the economic outlook has generally improved from the start of the year. That said, supply is still expected to dictate market pace this year,\u201d LMC Automotive said in a report.<\/p>\n

Investment bank UBS said Tesla\u2019s price cutting means Europe\u2019s electric carmakers will have to follow and with their higher cost structures the drive to make EVs as profitable as internal combustion engines (ICE) will be derailed.<\/p>\n

\u201cThere should be a knock-on effect on ICE pricing too. Irrespective of Tesla price cuts, the ICE segment should be much more competitive as production and inventories have grown while demand has declined in the 4th<\/sup> quarter,\u201d UBS said in a report.<\/p>\n

Mass carmakers will likely find maintaining price discipline and high mix difficult, while expecting only flat to slightly higher sales.<\/p>\n

\u201cWe\u2019re cautious on all mass (market manufacturers) for 2023, while preferring more cycle-resistant luxury names and Tesla thanks to cost and technical leadership,\u201d UBS said.<\/p>\n

Bernstein Research said Tesla\u2019s price cuts have shaken up the market and put pressure on competitors, but will have annoyed Tesla’s current customers who have seen the value of their cars undermined. As well as stimulating demand, it might also have the reverse effect as many potential electric vehicle buyers decide to wait for the next big price cut. This might have a positive outcome for Tesla\u2019s upmarket competitors.<\/p>\n

\u201cTesla is not only sacrificing its EV margins to achieve its volume ambitions. To some extent it is also placing the goodwill and brand equity that it has built up on the altar too. This is most important in the premium end of the market, where brand perception and social status are the crux of sales. We see Mercedes and BMW\u2019s offerings have now moved clear out of Tesla\u2019s price range. They\u2019re still holding on to their brands. In the long-run, this may actually be good for the premium (manufacturers),\u201d Bernstein said in a report.<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Auto sales and manufacturers\u2019 profits in Europe have been bounding ahead, but investors worry that a faltering economy and a price war initiated by electric vehicle maker Tesla may also infect the traditional combustion sector and end the positive scenario. The profitability of high-end manufacturers like BMW, Mercedes and Volkswagen\u2019s Audi and Porsche subsidiaries have […]<\/p>\n","protected":false},"author":1,"featured_media":5769,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-5768","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-featured"],"yoast_head":"\nRosy Scenario For Europe\u2019s Carmakers Likely To Stumble | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Auto sales and manufacturers\u2019 profits in Europe have been bounding ahead, but investors worry that a faltering economy and a price war initiated by\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ifintechworld.com\/?p=5768\" \/>\n<meta property=\"og:locale\" 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