German high-end automakers benefited from record prices for their luxury models in 2021, as a semiconductor shortage restricted vehicle supply in major markets as consumer demand soared.
Revenue per car at BMW, Audi and Mercedes-Benz has increased on average by almost 25% compared to the pre-pandemic period of 2019, an analysis by Stifel Bank for the Financial Times showed.
The increase was caused by a reversal of a decades-long trend in which the industry produced more cars than it sold. Automakers then offered increasingly higher discounts to push surplus cars onto forecourt, so sales volume targets could be met in time for accounting deadlines.
Since 2019, when the global economy weakened, automakers have started making fewer cars than they can sell, with the gap rising to around 4 million vehicles this year. While there was a similar deficit following the financial crisis in 2009, it was an anomaly amid years of overcapacity.
âWe have been witnessing a reduction in stocks for three years, driven by [restricted] procurement, âsaid Daniel Schwarz, analyst at Stifel. “It hasn’t happened before.”
As a result, Mercedes-Benz revenue grew from nearly â¬ 38,000 per car in 2019 to over â¬ 54,000 in 2021 through the end of the third quarter, while Audi’s grew from over 46 â¬ 000 to around â¬ 57,500, according to Stifel’s calculations.
BMW, which handled the chip crisis better than its peers, and lost less production time overall, saw a more modest increase, from just over â¬ 36,000 per vehicle in 2019 to over â¬ 38,000 â¬ in 2021 until the end of the third quarter. .
Much of this has been achieved by manufacturers who prioritize the production of more profitable models.
Mercedes sales, for example, fell 30 percent in the three months to the end of September, but revenues fell only 1 percent.
Stifel’s analysis shows that in just one quarter, Mercedes profits before interest and taxes increased by 1.4 billion euros simply thanks to better prices and making chips available in high-end vehicles and at higher margin.
With investors noticing the change, executives say they will continue to pursue this strategy even as supply constraints ease.
“There is no pressure to chase volume,” Mercedes boss Ola Kallenius told the Financial Times this month, while Harald Wilhelm, chief financial officer, pledged to “focus on where to find the money “.
âThis overarching strategy of not looking down [market] segments where we are but looking up, it will continue, âKallenius added.
Luxury car makers have also been helped by the record rise in used car prices. This not only made buying new cars more attractive, but also inflated the balance sheets of the financial branches of the high-end manufacturers, which operate large leasing companies.
“The cars are returned [to the manufacturer] after 12-36 months and the resale price is much higher than initially expected, âsaid Schwarz.
âFrom a short-term perspective, the lack of new cars today will make used cars scarce for at least the next two years,â he added. âIt should also support the price of new cars. “