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Old 03-22-2022, 08:51 AM   #1
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Default Volkswagen Made More Money Selling Fewer Cars In 2021

It seems the People's Car company has put its past behind it.
The COVID-19 pandemic has resulted in a peculiar market trend that has seen luxury manufacturers such as Bentley and Rolls-Royce reach new financial records, particularly in the USA and China. It appears that despite the pandemic resulting in a financial crisis for many, some have benefited from some impressive monetary success.

The result of this is that demand for expensive cars has risen to an all-time high. Companies like Mercedes-Benz have taken note of this and hinted that it would be streamlining its offering to focus on a smaller offering of more premium products. Ferrari has also declared that it has no intention of creating more affordable models and would ramp up production of its more expensive curated cars. Another signifier of this trend is Volkswagen's latest financial report.

In the recently revealed figures, VW reveals its operating profit, before special items, has increased by 451% from $550,000,000 in 2020 to $1.105 billion in 2021. This is despite 2021 reflecting an 8% reduction in deliveries from 5.3 million to 4.9 million units. Severe lock-down restrictions mean that production was hindered in 2020 but it was nothing compared to the supply chain crisis that seemingly has no end.

Volkswagen explains that strategy was key in maximizing income last year. Acknowledging the demand for more premium models, it dedicated more of its semiconductors to more aspirational models that are more likely to sell well. In doing so, it was able to record profits in both North and South America "for the first time in several years".

Ralf Brandstatter, CEO of Volkswagen Passenger Cars says that thanks to the ongoing challenges, the brand has evolved to be "much more profitable, more crisis-resistant and more effective" compared to last year. With its Accelerate strategy, we can expect it to grow even more with the German auto giant having some big plans lined up.

By 2022, we can expect Volkswagen to increase the deliveries of its fully electric products including the to-be locally built Volkswagen ID.4 thanks to the increased flow of semiconductors. Operating profits may also maintain growth with the group eyeing a goal of a 6% return on sales in 2023. The situation in Ukraine does mean that these aspirations may not come to fruition.

Looking at 2021's sales breakdown, there's no doubt that demand for electric cars from Volkswagen is increasing. In total, it was able to ship 369,000 units to customers across the world. This is a 77% uptake over 2020 when admittedly, not as many options were available. 106,000 of these were PHEVs while the remaining 263,000 were fully electric.

Creating more of a diverse range in its electrified offense are the aforementioned ID.4 and ID.5 which both have the option of a GTX performance trim. China's ID.6 also assisted in achieving a greater global market share and the arrival of the jovial ID. Buzz van is expected to increase EV profits even more throughout the coming years

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Old 03-22-2022, 08:54 AM   #2
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Default Chip-Threatened Automakers Sell Less, But Profit More


Chip-Threatened Automakers Sell Less, But Profit More
Neil Winton

Demand for new cars in Europe is strong although slowing, and automakers must be laughing all the way to the bank right?

Well no, because despite a clamor for new cars unleashed after the coronavirus lockdowns came to an end, production is being hampered by a shortage of crucial semiconductor chips, so that’s bad. Again, not really, because the product shortages mean the big auto manufacturers aren’t having to compete against each other for every sale, and so can gouge top profit margin dollars out of every sale.

“Isn’t (the auto business) a funny industry – the fewer cars manufacturers sell, the more money they make,” said Bernstein Research analyst Arndt Ellinghorst in a report.

And the sales growth slowdown is set to continue for the rest of the year, according to LMC Automotive, as it cut its forecast for Western Europe again. In its report on the first 8 months of the year, LMC Automotive said sales for the year will only rise 2.5%, compared with its month previous forecast of a 3.0% gain and July’s prediction they would jump 9.6% in 2021. For the first 8 months the annual selling rate was 11 million vehicles a year, which sounds a lot until you remember before coronavirus struck the annual selling rate was well over 14 million. The market is now weakening because of the semiconductor shortage.

“While the pandemic is not over in the region, the single biggest challenge facing the industry is now the auto chip shortage, which is currently constraining vehicle (sales) due to the lack of availability of vehicles, and those that are available being higher priced. With the current challenges likely to continue well into next year, we have lowered our near-term outlook in recent months, only seeing a more pronounced pick up in selling rates over the course of the second half of next year when supply constraints ease,” LMS Automotive said in a report.

The chip shortage will get worse before it gets better, said Fitch Solutions, and will only start to improve in 2022. This is because the Delta Covid-19 variant will continue to disrupt chip production in Asia, it said.

“We still only expect an overall improvement in the global supply of chips from mid-2022 onwards as new chip production capacity starts to come online. However, there will still be a shortage to some extent until mid-2023,” Fitch Solutions said.

Data firm IHS Markit INFO expects the global chip shortage to extend well into next year and cut its global car and SUV production forecast by 5 million this year to 78.5 million and to 82.6 million for 2022, cuts of 6.2% and 9.3%.
Investment bank Morgan Stanley MS said the automotive industry remains hostage to a lack of semiconductors.

“The situation has gone from ‘fluid’ to downright inexplicable. If semi supply is recovering in aggregate, why does this remain such an issue for autos,” Morgan Stanley said in a report.

“How long will this last? When will things return to normal,” the report asked, adding acute tightness will last through 2021, with normality not being restored until the 2nd half of 2022.

“It’s quite possible that just as the chip shortage situation came upon the industry in a sudden and unpredictable manner, its recovery may also come in a sudden and unpredictable way,” the report said.

Bernstein Research pointed out the combination of the coronavirus pandemic and shortage of chips forced fewer vehicles to made and lifted pricing and second hand market prices, with first half margins the highest in automotive history. But the report pointed to some investors believing fundamental performance will deteriorate because the industry will quickly revert to chasing sales once bottlenecks disappear.

“We believe this is an overly cynical and depressing view on the industry and its management teams. Our boardroom conversations suggest that supply/demand and vehicle pricing are at the very top of (manufacturers) agenda,” the report, headlined “Premium Pricing – Can you please not mess this up!”, said.
But investment bank UBS said it was hearing much cautious comment about the current quarter, with production recovery likely to take longer than initially anticipated.

“While the unprecedented price/mix situation for (manufacturers) will likely continue for longer, supporting strong margins, the loss of volume in the 3rd quarter is likely to lead to a sequential decline in profitability compared with the first half,” UBS said in a report.
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Old 03-22-2022, 08:59 AM   #3
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Default Automakers get creative to keep making money despite chip crisis


Automakers get creative to keep making money despite chip crisis

Michael Martinez

Ford Motor Co., which attributed a $561 million second-quarter profit to better-than-expected demand and strong pricing for its newest products, said it has started engaging more directly with chip fabrication plants and providing suppliers with longer-term forecasts. Ford also is now dual-sourcing more parts and stockpiling certain components to prevent further financial damage.

Difficulties remain — Tesla again delayed its long-awaited semitruck because of supply issues, while Ford CFO John Lawler admitted the chip crisis could "bleed into the first part of next year" — but the latest financial results suggested the toughest stretch may have passed.

"We are now spring-loaded for growth in the second half and beyond because of those red-hot products, pent-up demand and an improving chip supply," Ford CEO Jim Farley told investors.

Stellantis and General Motors, both of which have lost significant production to the chip shortage, plan to report earnings this week. Over the past two months, GM completed and shipped 30,000 midsize pickups that had been awaiting chips, and it found a way to increase production of heavy-duty pickups by 1,000 a month starting in mid-July.

In contrast to its rosier outlook for the remainder of the year, Ford was hit hard by the chip shortage in the second quarter.

The automaker earned $194 million in North America, the region's smallest profit since the second quarter of 2020, due mostly to significant downtime at many assembly plants.

Lawler said the shortage cut Ford's planned production in the quarter by half and that the number of unfinished vehicles awaiting chips had roughly tripled, to between 60,000 and 70,000. The company thinks it can get a majority of those vehicles into customers' hands by the end of September.

With many dealership lots running dry, Ford's North American market share fell by almost a third from the same period a year earlier, according to Edmunds data.

Ford executives say that's a short-term loss they expect to recoup as chips become more readily available and new products continue flowing into showrooms.

Ford said it now has more than 120,000 reservations for the F-150 Lightning electric pickup, which hits showrooms in the middle of next year, and that 2 out of every 5 reservation holders are switching from a gasoline-powered pickup. The company also has about 80,000 reservations for the Maverick, a hybrid compact pickup that goes on sale this year.

The crisis is prompting Ford to rethink how it gets many vehicles from the assembly line to a customer's driveway.

Farley said Ford plans to move to an order bank system for all of its products and maintain a 50- to 60-day supply of vehicles, much lower than before the chip crisis and pandemic.

Ford's order bank currently sits at about 70,000, Farley said. An order bank helps the company keep incentive costs down and reduces complexity by giving it a better idea of what exactly customers want.

"In our view, this is a bigger narrative change on the go-to-market strategy than meets the eye," Morgan Stanley analyst Adam Jonas said in a note to investors last week. "Hats off to Ford for innovating AGAIN on such important issues when we really didn't expect it. CEO Jim Farley seems to be up to some seriously cool strategic growth drivers behind the scenes here."

At the same time, Jonas questioned what the strategy shift means for retailers, asking whether it would "essentially turn dealers into customer delivery centers."
Farley said dealers shouldn't be worried about the move because there's opportunity to make more money on service.

"That's the most important thing for us; wiring a closed loop between the vehicle, the condition of the vehicle, the service capacity of the dealers and the customer," he said on Ford's second-quarter earnings call. "Our chance to win ... is that in-person service."

Less than a third of Tesla's net income in the second quarter came from selling regulatory credits to competitors, one of the few times it has made money selling the vehicles it produces unaided by other means.

The automaker delivered 201,304 vehicles in the quarter, up 121 percent from the same period a year earlier.

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Old 03-22-2022, 11:55 AM   #4
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Default BofA: Critical Levels At Cushing May Lead To Historic Short Squeeze In Oil


BofA: Critical Levels At Cushing May Lead To Historic Short Squeeze In Oil

By Charles Kennedy - Mar 22, 2022, 9:00 AM CDT

Storage levels at America's largest oil storage hub have fallen to extremely low levels.

Crude oil inventories at Cushing have shed some 13 million barrels since the start of the year, to stand at 24 million barrels as of last week.

The risk of a short squeeze is the highest around contract expiry dates near the end of the month.

Crude oil inventories at the Cushing hub in Oklahoma have fallen to the lowest seasonal level since the start of the shale revolution in the U.S., threatening sudden heightened price volatility this week.

This is the essence of a note written by Bank of America analysts as quoted by ZeroHedge as prices are once again on the rise after the European Union signaled it was mulling over sanctions targeting Russia’s energy industry.

According to the note, crude oil inventories at Cushing have shed some 13 million barrels since the start of the year, to stand at 24 million barrels as of last week, which was the lowest since large-scale shale oil production began in the country.

This level, the bank’s analysts went on to say, was likely close to minimum operational levels, which is not good news for prices. And that’s not all, either, according to the note.

Based on current oil price trends, it is possible that a large part of the Cushing inventories is being used for blending at refineries, and another part is being used as a backstop for pipeline oil flows. What this means is that these barrels cannot be used for physical delivery under West Texas Intermediate contracts—and this means supply may be even tighter than previously believed.

CNBC quoted Bank of America’s Francisco Blanch, head of commodities and derivatives, as saying that limited production, higher refinery runs, and higher exports of crude were shrinking inventories at Cushing. This, Blanch said, could cause even more volatility in oil futures because of the condition for physical delivery once the contract expires. The April WTI contract expires today.

“Given the market is desperately short barrels in the near term, we see increased risk of a short squeeze as WTI moves towards expiry each month,” Blanch said in the note, as quoted by CNBC.

At the time of writing, Brent crude was climbing towards $120 again, and West Texas Intermediate was trading close to $115 per barrel.

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