Renault financial report reveals big chip production success, but industry bottom forecast varies

Investors hope to learn more about the state of auto chip supply chains when European automaker’s report 3rd the quarterly financial results and news from France’s Renault on Friday that its production losses are much larger than expected won’t help their mood.

Some experts predict rapid improvement in semiconductor supply chains, but others see prolonged mourning.

Renault said its production losses for 2021 would be nearly 500,000 vehicles, up from 220,000 expected at the start of last month with more than 170,000 lost in the third quarter. Renault said 3rd revenue for the quarter fell 13.4% to 8.98 billion euros ($ 20.5 billion) from 10.37 euros ($ 12.1 billion) in the same period per year latest. French companies do not declare profits in the 1st and 3rd quarters.

Renault said that despite the drop in production, its operating profit margin for 2021 would be about the same as the 2.8% in the first half of the year.

Renault shares rose slightly to € 31.41 in European trading, at a rate slightly higher than that of the Europe Auto STOXX 600 index, which rose 1.26%.

Next week, Stellantis (October 27), Volkswagen (October 28) and Daimler (October 29) report their 3rd quarterly financial results. BMW reports on November 3.

As forecasts for car sales in Western Europe are scaled back and investors brace for poor results from major automakers, some analysts believe the worst is behind the industry, which is being disrupted by the chip supply crisis. . This has helped high-end German automakers who have focused their sales campaigns on selling fewer but high-profit vehicles.

BMW and Daimler should weather the storm better than Volkswagen. VW investors will wonder how much profits have been hit by reports that production at its flagship Wolfsburg plant so far this year was the lowest since 1958 with just 300,000 cars manufactured, according to Automotive News Europe.

Investment bank UBS believes the global auto industry may begin a strong recovery in 2022, which could lead to double-digit growth as semiconductor production resumes.

“In light of the restart and operation of packaging and chip testing factories in Malaysia, there may be a gradual recovery in automotive production (this quarter),” UBS said in a report.

Frank Schwope, analyst at Norddeutsche Landesbank Girozentrale, is not so sure.

“Given the semiconductor shortage and the fact that new manufacturing capacity might not start producing until 2023, the scarcity economy could extend into the following year,” Schwope said.

Fitch Solutions Country Risk and Industry Research is even less optimistic.

“The global auto industry will continue to experience operational disruptions over the next 3-9 months as we expect semiconductor supplies to start showing signs of improvement from the 2ndsd half of 2022. The combination of component shortages, continued shipping delays and localized outbreaks of Covid-19, among other risks, will slow the global vehicle recovery through the remainder of 2021, and most likely through first half of 2022, ”Fitch Solutions said in a recent report.

There is a growing stock of half-finished vehicles that will suddenly increase production once supply is normalized from the middle of next year, Fitch Solutions said.

Meanwhile, sales forecasts are reduced. Forecaster LMC Automotive lowered its forecast for Western Europe for the 3rd month following a barely noticeable 0.5% increase for 2021 to 10.74 million cars and SUVs, even less than the previous year’s coronavirus-crushed total of 10.79 million. LMC had forecast a healthy 9.6% gain for the year as recently as July, but continued with a forecast up 3.0%, then 2.5% a month later and now 0.5%.

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