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NEW CAR SUPPLY CONSTRAINTS ARE EASINGS, SAYS BLOOMBERG INTELLIGENCE
European new car supply constraints are starting to ease, just as consumers are curbing spending amid high inflation, rising interest rates and falling property prices, according to a new report by Bloomberg.
However, Bloomberg Intelligence’s Europe Midyear Autos Outlook 2023 report shows that the negative macroeconomic backdrop won't translate into lower 2023 sales, given 2022 matched prior European and US recession lows.
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Taking a global view, China has the scope to outperform after a strong sales recovery following H1 2022 lockdowns due to Covid-19.
One risk is that geopolitical unrest weighs on sentiment for German automakers, which rely on China for at least one-third of earnings.
Michael Dean, senior industry analyst - autos, Bloomberg Intelligence, said: “Reduced consumer confidence and rising interest rates point to fewer orders and declining prices for EU automakers just as semiconductor constraints ease, with crisis-level valuations reflecting uncertainty about high 2023 earnings before interest and taxes (EBIT) expectations and geopolitical risk.
“The industry is also being buffeted by the transition to battery-electric vehicles (BEV), and the weak execution of ambitious salesmix targets and escalating battery costs is driving down multiples.
“Other risks include BEV sales held back by an inadequate charging infrastructure, and battery supply becoming the industry's next bottleneck.”
Dean said the race for BEV supremacy only has two participants in his mind, with Volkswagen the sole contender for Tesla's crown until at least 2026.
He believes other legacy brands could gain critical mass on their next-generation of digitalized platforms “in the latter part of the decade”.
Bloomberg Intelligence said EU automakers' combined 2023 consensus EBIT has increased 8% since September as fears of a global recession receded; however, pricing discipline remains a key risk, and a 1% top-line decline suggests a 10% earnings downgrade, based on BI analysis.
