2023 Author: Charles Youmans | [email protected]. Last modified: 2023-05-20 18:41
The automotive industry has been hit hard by the coronavirus pandemic. Due to the lack of microchips, many factories had to completely shut down their production. And although consumer demand for new cars is gradually returning to its usual indicators, it is still very early to say that the COVID-19 pandemic is over. The shortage of semiconductors continues to give machine builders a lot of headaches.
For BMW and Mercedes, the chip shortage could be a boon in disguise. The two German luxury brands realized that people would not only wait patiently for months for their new premium cars, but also spend more money on models adorned with a three-pointed star or circular pattern in the colors of the Bavarian flag.
Both Mercedes and BMW have been criticized for chasing sales and launching many less expensive compact cars. And while they won't disappear anytime soon, the duo of German competitors are shifting their focus to larger, more expensive cars to drive even higher margins. Rather than relying on traditional target sales, they aim to sell fewer cars but make more money.
In short, Mercedes and BMW know that people will pay even more for new luxury cars and therefore prices will not come down once the microchip shortage disappears. Bernstein analyst Arndt Ellinghorst says a one percent cut in rebates increases profits in the auto industry by a whopping $ 20 billion. He went on to mention that discounts were down more than two percent in the United States and Europe from the high levels available before the pandemic.
Those hoping for a lucrative deal with Mercedes after the microchip shortage ends are disappointed: “Sooner or later the part problem will disappear and we will continue to work on price and profitability,” says Harald Wilhelm. Same if you are planning to buy a BMW: "Customers are willing to wait three to four months, and this helps our pricing policy." This type of strategy has been used by ultra-modern brands like Ferrari for some time now, and it seems to be infiltrating more “mainstream” luxury brands.