Key points:
Semiconductor squeeze appears to be EV's gain – EV mix targets revised upwards
German EV production >20% mix
Premiums plug-in bounce in order to shift profitable ICEs
Tesla's 12-month rolling share of the West European total market now >1%
Like a swirling and unforgiving whirlwind, the global passenger car market is being
battered and bruised to the extent that makes 2008's financial meltdown appear
more like a mild tremor. However, this time, the supply-side punches are bruising the market instead of the demand-side pounding witnessed post-Lehman Brothers. Also, this time around, while delivery and production numbers are sinking faster than the Titanic, paradoxically perhaps, profitability margins are moving in the other direction.
While the likes of BMW Group are scrambling to update profitability corridors, announcing at the end of September that they expect to reach an EBIT margin of the Automotive Segment between 9.5-10.5% this year (7-9% previously), its W- European delivery numbers, according to ACEA, are on a downward spiral, falling by -19.5% y/y in August and -24.3% in July.
So what have the bullish CFOs been drinking?
Passenger car manufacturers, being offered just a proportion of the critical semiconductors used in their highly modern vehicles – mainly originating from Asia – are having to ration these and are choosing to fit them to their most profitable models.
This is causing a rising sales mix for their premium-end models and consequently is reflected in the profit margins.
But what has this got to do with famously low, or even nonexistent profitability margins from EVs?
With tough fleet average EU CO2 emissions targets on the table, car manufacturers are having to balance their 'carbon books' and are increasing PEV sales mixes, with Germany and France both recording new penetration highs in August in order to compensate for those overweight luxobarges, that are as quick to turn heads as they are profits.
Take a glance at Volkswagen's multi-brand MEB dedicated fully-electric production
line in Zwickau, where CUPRA's Born was the latest model to join the line last month, and the daily production rate trend – presented in an investor relations presentation earlier in September – shows BEVs were not impacted by the chip shortage.
Daily production rates continue to rise slowly to the planned 1,500 daily rate.
Volkswagen confirmed to this report earlier this year that their BEV vehicles aren't more at risk from the shortage than their ICE models.
So while the likes of VW are keeping those green wheels turning, you can't help but avoid tripping over production line stoppage headlines from mass-volume models, including Ford's Fiesta (regular European top-5 model) facility in Cologne as well as Stellantis' Opel Grandland facility in Eisenach.
For this reason, the 2021 BEV forecast has been updated.
The total forecast for the 18 market West European passenger car region has been slashed to just 11.1 million units, or under 3 per cent growth over last year's tumultuous pandemic year.
BEVs are now expected to soak up 10.2% (1.132M units) of the total market while with PHEVs added to the equation – a route mostly exploited by premium OEMs – soaking up 9.8% of the total market (1.088M), the report now expects every fifth new passenger car this year to be a plug-in, translating to 2.22 million new vehicles, an increase of 66.4 per cent over 2020. While traditional OEMs were already altering their mantra up to 2025 to profit is the new volume – before scaling up to achieve economies of scale in the new EV world, post 2025 – few could have expected the severity of this downscaling of traditional high volume models, multiplied by the supply-side issue.
If the chip issue doesn't solve itself soon we could well see the premature demise of high volume, pile 'em high, sell 'em cheap ICE models earlier than expected.
May also interest you: July Report: European Electric Car Report July 2021 highlights... click here for the story
*Western Europe 18 Markets: EU Member States prior to the 2004 enlargement plus EFTA markets Norway, Switzerland, Iceland, plus UK