Automakers are starting to see weaker demand amid inflationary pressures

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BERLIN, Aug 3 (Reuters) – Automakers are reporting lower demand in Europe and North America, while analysts say there is mounting evidence consumers are shying away from higher prices and keeping their cash for essentials.

Although some upmarket brands such as Ferrari (RACE.MI) and Mercedes (MBGn.DE) have raised their sales forecasts due to continued high demand for top-end models, the outlook for most of the industry is bleaker. Continue reading

Waiting times for new orders are getting shorter as order books thin out. That’s even with slower-than-usual production and deliveries well below last year’s, executives said.

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“Incoming orders are declining,” said BMW boss Oliver Zipse on Wednesday in a conference call, referring in particular to Europe.

Automakers have so far protected their margins by raising prices, but soaring inflation in North America and Europe could make it harder to pass on rising costs.

“Demand is falling,” Volkswagen’s (VOWG_p.DE) Chief Financial Officer Arno Antlitz said last week, although he said order books were still full for the coming months. “The warning signs are for Europe and North America, less for the Chinese region.”

Inflation in Europe and the United States has soared in recent months, with central banks warning a peak could be months away, hurting consumer and business sentiment. Continue reading

Data from online dealerships and auction platforms showed a slowdown in demand since March this year, said Philip Nothard, Insights Director for Europe at Cox Automotive.

“Consumers are very cautious right now,” he said.

A survey by Munich-based Ifo Institute released on Wednesday showed German automakers’ backlogs of orders are shrinking and price expectations are falling on worries about a gas shortage and continued weakness in the Chinese economy.

“The weight of car buying on household budgets is something we’re going to encounter,” said Carlos Tavares, CEO of Stellantis (STLA.MI) last month.

For now, the automaker intended to continue passing its own rising costs on to consumers, but it couldn’t stay that way forever.

“There is a limit to price increases,” Tavares said.

In the United States, Ford is considering bringing back rebates and incentives that were scrapped last year due to supply chain concerns, Chief Financial Officer John Lawler said. Continue reading

“That’s a relief valve that goes forward,” he said.

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Reporting by Victoria Waldersee, Gilles Gillaume, Giulio Piovaccari, Joe White; additional reporting by Maria Sheahan; Edited by Matt Scuffham and Elaine Hardcastle

Our standards: The Thomson Reuters Trust Principles.

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