Cars around the world are on the verge of becoming more expensive, according to foreign reports.
The report also states that all vehicle related parts will be more expensive. Everything from the raw materials used for the parts of the vehicles will be expensive. According to the report, prices of steel, gear parts, frames and pieces of plastic are going up.
When a large part of the cost of production goes up, factories close down for months due to epidemics, lockdowns, labor shortages, the pressure to invest in new technologies, rising inflation, compared to the relatively profitable market we have enjoyed so far. Encountering very different options is another factor that car manufacturers have experienced over the past few months.
Considering a carmaker with $ 100 billion in sales, the Boston Consulting Group estimates that pre-interest earnings and taxes will fall by 40% despite a 10% drop in sales volume. Although it is an optimistic scenario, this analysis assumes that the company can eliminate all variable costs such as raw materials and labor, but in the current situation, it is not possible.
There is no doubt that car manufacturers can afford the increased production costs by reducing the incentives and discounts they use to attract buyers. But that is already happening in the United States and China, the world’s largest car markets, and it will not be a persuasive thing forever.
