European Auto Industry Faces Sliding Sales, But Bigger Hit To Profits

- Advertisement -


- Advertisement -

European automakers face a major hit to their businesses as recession looms and inflation eats away at consumer confidence, while threats to world peace also undermine the desire to buy a new car.

What may seem like a small drop in sales will translate into a huge hit on profits.

- Advertisement -

Sales to the US are also at risk. China will go ahead this year and face a decline in 2023.

Sales forecasts for Western Europe are being shaved off rather than down, with investment bank UBS forecasting 12.3 million cars and SUVs to drop 1.4% this year, while sales slip another 2.6% next year. As 12.0 million should be removed.

Industry analysts appear reluctant to reduce their sales forecasts, despite fears that an energy shortage could force European lights to go out and close factories. Recent concerns had pointed to the ruin of European settlement proceeds due to the steep rise in the price of domestic energy. Governments have unveiled huge subsidies not only to bail out their poorest, but also to ensure that economies have enough spending power to keep afloat.

Breaking Views from Reuters The column said that despite strict government action, the problem would persist for some time.

“The energy squeeze is a multi-year problem that will make Europe poorer and less competitive while saddled with a region with high public debt. Dealing with it will also cause ruckus to deal with inflation that will shorten the years. Will,” Breaking View columnist Hugo Dixon said in mid-September.

Manufacturers will find this disappointing as many have found the 2022 sales to be extremely profitable. That’s because the large backlog in sales resulting from the semiconductors shortage has forced companies to abandon the pursuit of volume and focus on higher-profit margin vehicles.

US based auto forecasting solution In this way, the deteriorating situation is covered.

“Markets across the world are trying to fight the expected slowdown. With global inflation running higher than economists have expected, slow sales across many industries have increased the risk of a recession. While the automotive sector is at low points in North America and Europe, especially in Eastern Europe, a strong slowdown could hurt them further,” Autoforecast Solutions said in its October report.

Fitch Solutions Country Risk and Industry Research said Europe will now be the worst-performing region in 2022, with sales down 10.8%, not least because of the Russian invasion of Ukraine. UBS maintains a decline of minus 6.8% and 15.6 million vehicles for Europe as a whole and recovers minus 2.4% and 15.2 million next year. Western Europe includes all the major markets in Germany, France, the UK, Italy and Spain.

UBS says US auto sales will fall 4.5% to 14.4 million in 2022, and remain the same in 2023. China sales will increase 4.8% to 24.9 million in 2022 and will slip 3.0% in 2023.

Investment researcher Bernstein says European profits are at risk.

“These risks threaten (manufacturers’) industrial and financial services margins, even as companies ramp up their electrification programmes. This leads us to favor premium and luxury brands that go higher and higher. enjoy flexible margins,” Bernstein said in a report.

UBS said the economic situation will cut auto sales across all key sectors in 2023, with the prospect of recovery based on improving chip supply disappearing after two 2-year bottlenecks. The investment bank lowered its global light vehicle production forecast for 2023 from 3 million to 82.6 million.

“We expect the auto market (manufacturers) to shift to less and more supply, with substantial negative impact on pricing power and margins. We’ve already cut manufacturers’ earnings per share estimates by 30%, but the downside for the price/mix could be worse as pricing power sees a near 10% net profit in the first half of 2020 There may be a risk,” UBS said in a report.

“EVs and premium/luxury cars in general should show the highest demand and pricing flexibility. We have also updated our EV model, with lower absolute numbers for the struggling European car market, but a stronger growth perspective for the US due to the new tax credits,” UBS said.

Credit: www.forbes.com /

- Advertisement -

Recent Articles

Related Stories