Wednesday, May 25, 2022
News BMW and Mercedes Show Increase in Profits Despite Lower Sales

BMW and Mercedes Show Increase in Profits Despite Lower Sales

BMW and Mercedes have seen a raise of their profits while their sales slumped

  • Sales of all car companies have been impacted by the electronic chip shortage

  • High demand and low supplies mean automakers can increase the price

  • BMW sales slipped 12%, but profits increased 50%

Most automakers are experiencing one of the worst periods of their history right now due to the electronic chip and semiconductors shortage, but some brands still manage to increase their profit.

Despite sales that are lower than they are usually, some premium brands have been able to turn a profit for 2021 so far, some have even increased their margin significantly.

This can be attributed to the financial impacts of the COVID pandemic, which seem to have been tougher on lower income people than they were on more affluent buyers.

This translates into a high demand for luxury cars, a demand that can’t be fulfilled by automakers due to the shortage that limits production.

Since the demand is high and the supply is low, premium automaker have no incentives to lower the cost of their cars. Instead, they can get away with raising the asking prices of their models without seeing an impact on their already lackluster sales.

In addition, automakers have prioritised building bigger and more expensive cars and SUVs with the components they can get their hands on, since those vehicles provide better profit margins than cheaper, smaller ones.

This is why BMW joined Mercedes in having raised their profit over the third quarter of 2021 despite seeing a drop in sales.

Indeed, BMW suffered a decrease in sales to the tune of 12% but it saw its profits increase by 50% to $3.4 billion USD.

Mainstream automakers are not so lucky, since Volkswagen, and others, experienced a reduction in profits along with their dwindling sales.

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