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| Economy |
| Oversupply of cars to trigger price war, says UBS |
| 2023-04-06 |
| [Telegraph via Yahoo Finance] A glut of cars on the market is to trigger a price war among manufacturers as demand fails to keep pace with supply, analysts have forecast. UBS has estimated that global car production will exceed sales by 6pc this year, leaving an excess of five million vehicles that will require price cuts to shift. A brimming order book for most carmakers means that prices are likely to remain high for the first half of the year, analysts at the bank said. After that, sluggish economic growth and higher living costs will squeeze potential buyers’ ability to afford new cars, which is likely to hit prices as cars remain unsold. Carmakers have already begun cutting the price of electric vehicles (EVs) as the soaring cost of energy and the expensive upfront cost of models means they are becoming increasingly unaffordable. In January, Elon Musk’s Tesla cut the price of its cars by up to £8,000 in the UK, putting some of its cheaper models on an even footing with brands such as Skoda and Kia. Meanwhile, the cost of second-hand EVs is also falling, with the average price of a pre-owned electric vehicle down by 13pc in the last year to £33,060, according to AutoTrader. UBS said this trend is now likely to filter through to petrol and diesel cars as demand falls. Analysts led by Patrick Hummel said in a note to clients: "Given the bullish production schedules, we see high risk of overproduction and growing pricing pressure as a result. The price war has already started unfolding in the EV space, and we expect it to spread into the combustion engine segment." Luxury carmakers, which are generally more resilient during an economic downturn than their mass market rivals, will be less affected and it will be makers of family cars which will likely suffer, the analysts said. Overproduction has long been a brake on the margins for car companies. Companies would set targets for production, rather than sales, and then expect dealers to shift the cars they made. Excess stock meant slashing prices, which was good for consumers since cars were more affordable. However, demand soared during the pandemic as households opted to drive instead of taking public transport, while lockdowns and staff shortages caused production to collapse. This led to record profits for car companies as they were able to charge more for their cars. Toyota, Volkswagen, BMW, Mercedes and Vauxhall owner Stellantis all posted record profits in 2021 and maintained high returns in 2022. Renault went from an €8bn loss in 2020 to a €9bn profit in 2021. But as the supply of components has slowly returned to normal, they are all rushing to maintain market share in the face of increased competition from Chinese carmakers. Up to 30 new electric vehicle brands, most of them Chinese, are eyeing up the UK car market, according to an industry report seen by The Telegraph. Challengers have designs on the cheaper end of the market, preparing to sell mass market battery-powered cars to Britain. |
| Posted by:Besoeker |
| #7 Farm truck prices are out of this world. 2xExpensive at 1/2 the price. Will keep the Mexican mechanic busy |
| Posted by: Skidmark 2023-04-06 15:50 |
| #6 Farm truck prices are out of this world. Will keep the mechanic shop busy for awhile working on my old stuff. |
| Posted by: Bill Greans6336 2023-04-06 12:38 |
| #5 Just looked at Used 2-22 Ford F-150's in Reno area online. 4x4 Crewcabs with the XLT Package and 20-30k miles, priced in the low 70's to mid 80's. A King Ranch with 31k for $91,000. Nuts! |
| Posted by: NoMoreBS 2023-04-06 11:43 |
| #4 I gave a relative a lift to a Nissan garage. Stupidly expensive stuff in the lot. Probably actually a good value, but... |
| Posted by: M. Murcek 2023-04-06 10:11 |
| #3 I was at the Toyota dealer yesterday, and they are still partying like its 2021. Nothing on the lot to test drive. No used vehicles. 2-4 month wait for a new one. |
| Posted by: Angstrom 2023-04-06 10:09 |
| #2 I buy used because the union premium died when the original owner drove it off the lot. Yes, yes, I still have to buy auto parts that the UAW gets a skim from, but that's the price of doing business. Lately, I go to Pick Your Part or order from them online. Recommended, if you know what you are ordering. |
| Posted by: M. Murcek 2023-04-06 09:51 |
| #1 Attention US Carmakers !!! When you make a car in Mexico to avoid 70% of the Union labor costs, but you add them in anyhow. Then price a vehicle at what is in many southern states equal to 50% to 75% of buying a family 3 bed /2 bath 1500 sq/ft home. Plus, the Dealer's F&I guy skims 2 to 3 points on the Car Loan interest rates & etc... for his and the dealer's pocket. Then do all this is BEAR Economy to boot. Any business thinking person would see you loaded a shotgun and shot both barrels into your own Feet. But wait .....the lower prices will be off set by the new HIGHER Car Loan interest rates. So will your Hail Mary sales effort help? |
| Posted by: NN2N1 2023-04-06 09:43 |