Automotive financials strong this year, but tougher times ahead, says GlobalData

Following the latest strong part-year financial results and guidance on full-year outlook from BMW and Stellantis;

David Leggett, Automotive Analyst at GlobalData, a leading data and analytics company, offers his view:

“Car companies are getting a big bottom-line lift on recovering vehicle markets and high margins on sales – especially in North America, but also Europe and China. Company cost bases have also been contained through the pandemic; much higher volumes sold this year have quickly inflated revenues and operating profits. High-margin premium brands are doing particularly well and looking around the world, new car transaction prices are extremely high in the US. It’s a good time to be selling new cars and trucks there – if you can supply them to market.

“There are tougher times ahead though. The big swing to demand recovery from last year’s extremely low base has now largely completed its initial surge and we see a flat or slightly declining global automotive market in the second half of this year.

“Furthermore, semiconductor shortages are beginning to materially affect sales in the US, Japan and China which we expect to continue to choke sales into the start of Q4.

“GlobalData’s world light vehicle sales forecast for the year has recently been downgraded to 84.7 million, an 11.9% increase on 2020 but still almost 5% down on 2019’s total.

“The year’s sales outlook is moving beyond being driven mainly by infection rates and accompanying lockdowns to being more affected by ongoing supply chain disruption.”

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