Analysts predict that the glut of cars on the market will trigger a price war between manufacturers
UBS estimated that the global production of cars will exceed sales by 6% this year, leaving excess of the five million vehicles that will require a price cut to change, it said Infostock.bg.
The overflowing order book for most manufacturers of cars means prices are likely to remain high in the first half of the year, analysts at the bank said.
Slow economic growth and higher living costs will then suppress the ability of potential buyers to afford new carswhich is likely to hit prices as cars remain unsold.
The manufacturers of cars have already started to reduce electric vehicle (EV) prices as rising energy costs and expensive upfront costs for the models mean they are becoming increasingly unaffordable.
In January, Elon Musk’s Tesla cut the prices of its cars by up to £8,000 in the UK, putting some of its cheaper models on par with brands such as Skoda and Kia.
Meanwhile, the price of second-hand electric cars is also falling, with the average price of a used electric vehicle down 13 per cent over the past year to £33,060, according to AutoTrader.
UBS said this trend is now likely to shift to petrol and diesel carsas demand declines.
Analysts led by Patrick Hummel said in a note to clients: “Given the bullish production schedules, we see a high risk of overproduction and increasing price pressure as a result. A price war has already begun to unfold in the EV space and we expect it to spill over into the internal combustion engine segment.”
Manufacturers of luxury carswhich are generally more resistant during economic downturn from competitorsthey are in the mass market, family producers will be less affected cars are likely to suffer, analysts said.
Overproductionit has long been a drag on car companies.
Companies typically set production targets, not sales, and then expect dealers to re-sell the cars they’ve made. Excess inventory means steep price cuts, which is good for consumers as cars become more affordable.
However, demand has surged during the pandemic as households have opted to drive rather than use public transport, while lockdowns and staff shortages have caused production to collapse.
This lead to record profits for car companies as they were able to charge more for their cars. The owner of Toyota, Volkswagen, BMW, Mercedes and Vauxhall Stellantis noted record profits in 2021 and maintain high returns in 2022. Renault went from a loss of 8 billion euros in 2020 to a profit of 9 billion euros in 2021.
But as the supply of components slowly returns to normal, they are all scrambling to maintain market share in the face of increased competition from Chinese auto manufacturers. cars.
Up to 30 new electric vehicle brands, most of them Chinese, are eyeing the UK car market, according to an industry report seen by The Telegraph. Challengers have designs at the cheaper end of the market, preparing to sell mass-market batteries cars in Great Britain.
