Mercedes-Benz and BMW Maintain Premium Pricing by Controlling High-End Model Shipments

Semiconductor Shortage Triggered by COVID-19 Crisis
High Demand for Luxury Car Models Despite Rising Automobile Prices
Mercedes-Benz and BMW Adopt Strategy of Selling More Expensive Cars Rather Than Increasing Volume

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Daimler and BMW have announced plans to maintain high car prices by limiting the shipment volume of premium models even after the semiconductor supply shortage is resolved.

According to major foreign media on the 12th (local time), Daimler, the parent company of Mercedes-Benz, and BMW stated that they will continue to limit the shipment volume of premium models to keep car prices, which rose due to the semiconductor supply shortage, at a high level. The semiconductor shortage triggered by COVID-19 led to an increase in car prices, and the strategy is to maintain this through shipment volume control.

Although German luxury car companies had already been moving away from mass production and sales strategies before COVID-19, the pandemic confirmed that consumers are willing to pay high prices for premium vehicles, prompting car companies to adopt even bolder strategies, analysts say.

Harald Wilhelm, CFO of Daimler, said, "We plan to deliberately keep the number of vehicles below demand" and "At the same time, we will adopt a strategy focused on high-priced luxury vehicles."

Nicholas Peter, BMW CFO, said, "BMW's pricing power has significantly increased over the past 24 months," adding, "We will manage supply to maintain the current level of pricing power."

In fact, price increases have already impacted the earnings of BMW and Daimler this year. Mercedes recorded a 12.2% profit margin last quarter, a significant increase from 8.4% in the same period in 2018. BMW's margin rose from 8.6% to 16%.

Bernstein analyst Arndt Ellinghorst said, "The COVID-19 pandemic made everyone, including dealers, realize that a different paradigm for pricing factors in the automotive market is possible," and analyzed, "If the average discount rate decreases by 1 percentage point, automakers would gain an additional $20 billion (approximately 23.4 trillion KRW) in profits."

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