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What's going on?

Data out on Thursday showed that car sales in Europe slumped again last month, leaving carmakers searching for any possible route that will get them cruising again.

What does this mean?

Europe’s carmakers have been lacking the parts they need to keep production on track for months now, so they’ve been stuck making – and in turn, selling – fewer cars. Just look at some of the region’s giants: Renault, Volkswagen, and Stellantis each sold 4%, 12%, and 18% fewer cars last month than the same time last year. In fact, there were 6.7% fewer new cars registered in Europe this February than last, worse than January’s 6% fall and the weakest showing for February on record. Carmakers, then, are likely to fall back on the one trick that’s been keeping them going: focusing on manufacturing their higher-end, more profitable cars to make up the shortfall.

Why should I care?

Zooming in: It’s only down from here…
Thing is, last month’s data only accounts for the very start of Russia’s war in Ukraine, and there’s likely a lot more fallout to come. After all, Ukraine’s a major supplier of key car parts, and analysts reckon shutdowns in the country could cut Europe’s production numbers by up to 700,000 in the first half of the year alone. Add in that German giants Volkswagen, BMW, and Mercedes have already cut production at their European plants, and you’ll see why Bloomberg Intelligence thinks the region’s car sales could flatline this year, having previously predicted 5% growth.

The bigger picture: Europe, meet Japan.
European carmakers aren’t alone: Toyota said earlier this week that the chip shortage is forcing it to make more production cuts this month. That comes just days after it lowered its domestic production targets for next quarter, in an effort to ease the strain on its suppliers. And since lockdowns have also forced some of its Chinese plants to shut down, there could be more cuts to come.

Originally posted as part of the Finimize daily email.

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