On Breakingviews: Car companies are trying to manage inventory so that supply and demand – now falling – will match up. They only have so much in their control, writes JMAGuilford BVPredicts
The lost volume cost GM’s bottom line almost $5 billion in 2021 – so it jacked up prices on desperate buyers, more than making up for it. Ford, too, ended 2021 with its highest operating profit margin for five years.
The pricing power will inevitably unwind as problems from backed-up shipping to production shutdowns ease. But while supplies may return to normal, the industry might not follow suit.fell 14% year-over-year in November – leaves buyers with less money from trade-ins. The U.S. central bank is also raising rates, making auto loans more expensive. The double whammy is sure to dent demand.
Automakers’ production may not return either, though. GM boss Mary Barra has said in multiple analyst calls and presentations that her company is scrutinizing how quickly dealers are selling cars. In July, she was more blunt, saying inventory will “never go back to where we were before the pandemic.” Electric-car leader
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