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Automakers focus on cars with high profits

AmericaThe shortage of chips has forced major carmakers in the US to shift their focus to more profitable cars.

During a supply crisis of components, especially chips, American carmakers may begin to focus on lower-priced but higher-priced cars instead of cheaper models. GM CEO Mary Barra said that the company can deliver better results without having to stock up on vehicles or increase sales volume with low-cost, low-margin models.

A car production line at a factory in the United States.

In the past, American automakers often chose to mass produce cars with large sales but lower profit per car to attract more buyers. According to Alfred Sloan, president of GM in the years 1920-1950: “A car should fit every budget and purpose”. But after a challenging period in the pandemic and difficult to face semiconductor sourcing, by prioritizing the sale of cars with higher margins, GM was able to gain profits. steady profit in the first quarter.

“We will never go back to pre-pandemic inventories because we have learned that profits can be increased by producing high-value vehicles,” Barra said. Similar statements were made by other automakers, including Stellantis and Ford.

During the chip shortage, GM shifted supplies and supported the production of higher-margin cars while temporarily ceasing production of low-volume, high-volume models. GM also recently announced it would cease production of its second best-selling model in the US, the Chevrolet Equinox. It has also cut production of the Cadillac XT4 and Chevy Malibu.

Gaining larger margins by reducing inventory, restricting large volume dealers and focusing on better-margin models is not a new concept to Detroit’s Big Three. However, it was not widely deployed due to pressure to open factories and chase sales. But under pressure from outside from the lack of supply, car manufacturers have been forced to follow this path.

However, that is not good news for GM. Barra goes on to say that the semiconductor shortage is likely to worsen before it gets better, with even Ford and Stellantis predicting a supply delay is likely to continue in 2022. GM also predicts. report a shortage of chips is likely to lose between $ 1.5 billion-$ 2 billion in profits this year.

Sunshine (according to the Carscoops)


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