Automakers are considered very sensitive to the economy and interest rates. In periods of unusually high inflation, such as the current one, consumers may be more reluctant to make expensive purchases such as a car. In addition, financing costs when buying a car increase with capital market interest rates.
Since the beginning of the year, the European car industry has lost almost a quarter. “The reason for the sales pressure: concerns about future demand for cars,” wrote Ulrich Stephan, chief strategist at Deutsche Bank. Demand typically drops by about 20 percent during a downturn. In the short term, there is reason for hope, because an average overhang of eight million vehicles has increased due to semiconductor restrictions related to the pandemic. However, once this is completed, demand should drop significantly and put pressure on producers’ margins, the expert predicted.
At BMW, experts complained, among other things, that the Munich company is not as profitable as its biggest competitor Mercedes-Benz. bmw