Frustrating Microchip Shortage Has Created a New Strategy for Automakers like Mercedes-Benz
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The microchip shortage has vastly impacted automakers like Mercedes-Benz—with car demand outweighing supply, leading to inventory shortages.
Factory shutdowns last spring during the pandemic and now the global shortage of semiconductor chips have both contributed to the decrease in new cars.
In fact, when new supply does come in, many of those are already sold. The microchip shortage has driven demand in the used car market—and for consumers, that has meant higher prices and weeks or months spent waiting for the new vehicle they want.
But despite the inventory shortages and waiting lists, the chip shortage has actually not been all bad for automakers.
As a result of the shortage, automakers like Mercedes-Benz have shifted production strategies.
Mercedes-Benz and other automakers shift strategies
As a result of the shortage, car manufacturers have shifted their production to more profitable models like larger, fully equipped SUVs, according to Fortune.
Automakers have also been forced to adjust in other ways to create profitable vehicles sold at list value—shifting from the existing strategies of making cars as fast as possible and offering incredible rebates to get them off the lot.
In fact, some believe that this practice will last beyond the chip shortage, weaning automakers off their previous practice of relying on rebates to sell more cars. A quicker shortage may not have had such a lasting effect.
Earlier this month, Daimler along with Ford, Volkswagen, and Stellantis reported better-than-expected second quarter results. Daimler cited “favorable product mix at its core Mercedes-Benz brand,” as well as strict cost management and reduced credit risks, according to Fortune.
Dailmer attributed its third straight quarter of double-digit margins to Mercedes’ focus on profitable growth and tight cost control.
The impact on consumers
But it seems that consumers have been hit the most by the situation.
That’s because even though automakers might be benefiting in certain ways, consumers are paying more in showrooms. They are actually paying for cars at list price rather than the 10 to 15% discounts they usually see since they cannot use the rebates previously offered.
In the U.S., where inventories are much more depleted than Europe, some dealers are even marking prices up, according to Fortune. Experts say the next 12 to 18 months will show whether this practice can be sustained.
While the increased pricing discipline might actually benefit the industry, carmakers could still suffer if they cannot deliver to customers during the post-pandemic market boom.
Micro chip shortage outlook
In June, new car sales were down around 14% compared to pre-pandemic numbers from 2019, according to Car and Driver.
The data further shows that in 2019, around 17 million cars were sold in the U.S. That was the fifth year in the row the industry sold that much.
Even though sales have been lower this year, current projections have them remaining at 16 million.
Automakers believe the bottleneck due to the chip shortage won’t end anytime soon. In fact, Volkswagen said it would most likely affect more deliveries in the second half of the year.