The car market is growing but this outward sign of success masks a weakening environment for manufacturers. Supply chain interruptions have been repaired and new cars are hitting markets thick and fast. This is forcing down prices and will hit industry profit margins later this year.
GlobalData has raised its sales forecast for Western Europe again. The forecast now is for an 11.8% gain to 11.34 million in 2023. In September it expected a 10.7% gain, and in August 9.4%.GlobalData said economies across Western Europe, including the five biggest markets Germany, France, Britain, Italy and Spain, still face challenging conditions with high inflation and financing costs. The forecast of 11.34 million sales is about 3 million short of 2019’s pre-Covid level.
European manufacturers are about to report solid third-quarter earnings before succumbing to profit pressures in the fourth quarter. According to investment bank UBS, Volkswagen may cut its profit projection for the year. UBS said VW may have to dilute its profit margin target for 2023 of 7.5 to 8.5%, while premium operators like Mercedes , BMW 10.0%) and Porsche will hold steady.“The state of auto demand is still obscured by pent-up demand and backlogs, but increasingly it seems the earnings collapse that many feared might never arrive. Pricing worries don’t seem to be materializing, but notably the ability to pass through higher costs seems to have diminished.