Surprising Earnings from Global Automakers, Semiconductor and Raw Material Challenges Ahead in H2

Surprising Semiconductor Performance Amid First Half Shortage
Raw Material Price Pressure Intensifies, Clouding Second Half Outlook

Stellantis assembly line (Photo by NYT)

[Asia Economy Reporter Yujin Cho] Global automakers posted surprising earnings in the second quarter, but they are expected to face the dual challenges of semiconductor shortages and raw material price pressures in the second half of the year. Shutdowns and production cuts continue in the second half due to semiconductor shortages.

On the 3rd (local time), Stellantis, formed by the merger of Fiat Chrysler and Peugeot Citro?n and officially launched this January, announced in its first-half earnings report that sales surged 46% year-on-year to 75.31 billion euros (approximately 102.7 trillion KRW) from 51.668 billion euros in the same period last year. Net profit turned positive to 5.936 billion euros during the same period.

German automaker BMW also turned a profit with a net income of 4.8 billion euros, supported by strong sales growth in China and the United States, recording sales of 28.6 billion euros, a 43% increase.

Volkswagen, which announced its earnings at the end of last month, also turned around from a 2.394 billion euro loss in the second quarter of last year to an operating profit of 6.546 billion euros. Sales during the same period surged 63.8% to 67.293 billion euros. Ford recorded sales of 26.8 billion dollars, up 38% year-on-year, with a net profit of 561 million dollars.

The market had expected these companies to post losses in the second quarter, when the semiconductor shortage peaked, but they defied expectations with surprising earnings. This strong performance was driven by price strength amid a surge in vehicle demand despite supply shortages.

The Wall Street Journal analyzed that the strong earnings were driven by explosive growth in new car demand, fueled by abundant liquidity in the market after COVID-19 and opportunities for trade-ins of used cars. Additionally, a strategy to focus production on high-margin models as a countermeasure to semiconductor shortages contributed to improving profit margins.

However, the outlook for the second half remains bleak as worsening management conditions due to intensified semiconductor supply difficulties and rising raw material prices, along with resulting production stoppages, continue.

After announcing its earnings, Stellantis warned that raw material price increases are likely to worsen further in the second half and that semiconductor shortages will continue to impact production. In particular, the company said that raw material price hikes for steel, aluminum, and copper increased costs by 700 million euros in the first half, and this increase is expected to grow in the second half.

Stellantis stated, "Production was reduced by about 20% in the first half due to semiconductor shortages," and added, "Although the situation is fluid, similar impacts are expected in the second half."

BMW also warned, "Although sales performance improved in the second quarter, the global semiconductor chip shortage and unstable raw material prices will pressure earnings for the remainder of the year."

Shutdowns and production cuts are also expected to continue. General Motors (GM) announced on the same day that it will halt operations at three of its most profitable North American pickup truck plants due to semiconductor shortages. GM avoided disruptions in pickup truck production by stopping production of unpopular models, but when even that became difficult, it moved to halt production.

This content was produced with the assistance of AI translation services.