Selling prices will remain high as there is continued demand for their cars.
The Financial Times has just shared news where both BMW and Daimler have announced that they will keep their new car selling prices high even after the current computer chip crisis comes to and end. Both brands have seen a continued demand for their luxury vehicles around the world despite an economic crunch and movement control with no ‘push’ by buyers requesting discounts in previous years.
The willingness by buyers during this global pandemic to pay higher selling prices has car manufacturers convinced to keep their prices high and stay ahead of the mid-segment brands that have been pushing their quality and prices upwards and ‘forcing’ premium brands like BMW, Mercedes and even Audi to move a little downward the price chain to keep their market share.
Earlier this year in July Fortune magazine shared information where the Volkswagen Group pre-released record first-half operating profit of €11 billion, it said the chip shortage it first flagged in mid-December 2020 would now likely affect deliveries more in the second half than in the first, as dealers were able to rely on inventories.
Meanwhile, BMW Group production chief Milan Nedeljković told reporters the current output gap at his company amounted to roughly 30,000 vehicles, as assembly lines across its factory network stood motionless (partly due to chip shortages) during individual shifts or even entire days.
Then a few days later Germany’s Daimler followed Stellantis in reporting better-than-expected second-quarter results, citing favorable product mix at its core Mercedes-Benz brand, strict cost management, and reduced credit risks from its loan book.
So what happened? Well, as the chip shortages from factories in Taiwan hit manufacturers and supply reduced, car buyers (even in Malaysia) were willing to forgo the usual haggling for a discount and were willing to pay full selling prices for their new Mercedes-Benz.
The semiconductor shortage appeared initially as a market sales crunch which then became a silver lining.
Not only have car manufacturers pushed their production toward more profitable models such as larger, fully equipped SUVs, the semiconductor shortage may lead indirectly to a lasting benefit by weaning automakers off their addiction to move metal with the aid of margin-killing rebates, over-trades and pre-registration stock.
Yes, it looks like the day for walking into a car showroom all smug and ready to haggle on your new car price is diminishing. The day of thinking you can get a ‘pre-registered’ BMW from the struggling car dealer has ended. Now it is the car sales-person’s turn in sitting and deciding if they want to hand you part of their stock list.
In fact, you might need to ‘slip something’ into the sale persons’ shoe to get your new car allocation.
Welcome to more expensive luxury cars and a wider divide between middle class car buyers and upper middle class car buyers in Malaysia and also around the globe. Moving up the social ladder has just become more difficult.