Under the shortage of chips, the bicycle revenue of German car companies has not decreased but has increased, what is the reason?

The chip shortage problem has not eased, but why is the revenue of German car manufacturers not falling but increasing?

The latest data from market research firm Susquehanna Financial Group shows that in December last year, the chip delivery time was extended again, now reaching 25.8 weeks, the longest delivery time since the company tracked the data in 2017. The agency also said that the shortage of microcontrol unit (MCU) chips is the most prominent, which may continue to constrain the production capacity of automakers.

The shortage of upstream chips has increased the production cost of cars. However, this has not affected the revenue of German car manufacturers in the slightest. A survey by Stifel Bank in the United States shows that compared with 2019, the revenue of Mercedes-Benz, BMW and Audi has increased by an average of nearly 25% per vehicle.

Li Xuan, a senior analyst in the technology industry of Haitong Securities, said in an interview with the first financial reporter that during the new crown pneumonia epidemic, the supply and demand pattern of the global automobile market has changed, and the supply and demand have given automakers the energy to focus on the luxury car business with higher profits. However, at present, Intel and many other companies have increased chip production capacity, the problem of chip shortage is expected to ease, and the business model of automakers may change again in the future.

The pattern of supply and demand in the automobile market has reversed

The earnings data of German car manufacturers also provide evidence of this phenomenon. In the third quarter of last year, Mercedes-Benz's overall car sales fell 30% year-on-year, but overall revenue fell by only 1% year-on-year, and the company's EBIT profit has now increased by 1.4 billion euros in a single quarter.

Stifel believes that since 2019, the inventory of global automakers has been declining for many years, and the current pattern of the market has changed from oversupply to undersupply. By the end of 2021, the difference between global vehicle production and sales has widened to about 4 million units.

Data from market research firm IHS Markit shows that under the impact of supply bottlenecks, the global automotive industry is expected to reduce vehicle production by 15% in 2021 compared with 2019. In addition, Stifel cautioned that shifts in demand factors are equally important. During the pandemic, global consumers have increased their demand for cars.

Li Xuan told the first financial reporter that this is because after the governments of many countries have increased their fiscal and monetary policies, some rich people have more cash to buy cars. At the same time, the epidemic has also changed people's travel habits, preferring to travel in private cars rather than public transportation.

Ola Kallenius, chief executive of Daimler Group, mercedes-Benz's parent company, said that because there is no pressure to pursue sales, the company's business can tilt toward luxury cars, and chips are also prioritized for these models. Luxury cars tend to be more profitable than affordable cars.

Stifel also said that the current price of used cars has risen to record levels, which also makes the relative price of luxury cars more attractive and will support the pricing of new cars. At the same time, this will also support the business of the financial sector of car companies.

Will the supply chain management model of car companies change?

Automakers such as Volkswagen expect chip shortages to persist and are not expected to ease until at least mid-2022, hampering the production and delivery of their vehicles.

Sheng Linghai, vice president of research at Gartner, an American research and consulting company, said in an interview with first financial reporters that since May 2021, the chip industry has experienced the most serious shortage of goods in 20 years. There are both accidental and inevitable factors behind this. Occasional factors such as repeated epidemics and climate change have disrupted the chip industry chain in Asia, the Americas and other places. The inevitable factor is that the chip industry will produce a cycle in about two or three years, and it is currently in a more serious moment of short supply.

"The chip shortage in 2021 is due to the decline in investment in the industry in the previous two years, while in 2019, the global chip industry is in a state of oversupply." He said, "At present, whether it is chip companies such as Intel or auto parts companies such as Bosch, they have increased their investment in chip production capacity, and it is expected that the problem of chip shortage will be alleviated this year." ”

Gartner's forecast shows that in 2022, global chip production capacity will increase by 15% compared to 2021. Among them, the production capacity of 55-65 nanometer chips widely used in the automobile manufacturing process will increase by 20% year-on-year.

Sheng Linghai said that although automakers reduce the negative impact of missing cores by giving chips to more profitable models, this is only a stopgap measure. Because auto companies can't give up business other than luxury cars, how to effectively manage the supply chain in the future is a problem that all automakers need to solve.

Gartner believes that the supply chain management model of automakers may change in the future. It is expected that by 2025, at least half of the top 10 automakers in the world by market capitalization will develop their own chips.

Recently, both Ford and General Motors announced that they are looking to partner with chipmakers and potentially develop and manufacture chips. At present, Ford has reached a strategic cooperation agreement with the American chip manufacturer GF. General Motors said it has also established ties with Qualcomm and NXP chip giants. Tesla said it would reduce the disruption of supply chain issues to its vehicle production through its internal software engineering expertise.

Sheng Linghai said that since 2019, the attitude of automakers to chips has changed from conservative to positive. The market in the automotive industry is large enough, and the cooperation between vehicle companies and chip companies can give birth to many new opportunities. However, due to the excessive initial investment in the chip industry and its certain cyclicality, this is contrary to the concept of zero inventory in the supply chain emphasized by vehicle companies, or brings certain risks to the entry of vehicle companies into the chip industry.