Global Economic Changes Affecting the Car Market

Which processes affect the automotive industry’s production capacity, parts supply, and prices? Changes in the global and European economy are having a fundamental impact on the automotive industry. At the beginning of the year, it’s worth checking out what is expected for 2022.

Global situation of markets

Based on the financial indicators at the end of the previous year, it was clear that due to global market developments and the impact of Covid, a balanced economic environment was not expected in 2021. In the third quarter of 2021, the recovery of the global economy from the crisis continued to slow, while another wave of the coronavirus epidemic and emerging virus variants caused a renewed increase in the risks surrounding recovery.

Rate of inflation

Inflation has risen in many countries, including the Central European countries. One of the reasons for this is the sharp rise in energy and raw material prices and the supply difficulties in developed regions. Based on the price increases announced so far in the beginning of 2022, economic analysts do not expect a positive effect on inflation. Even without the impact of declining energy prices, price increases can be significant, including rising car prices.

What is expected? It is difficult to predict market developments in this volatile market situation, but the Monetary Council forecasts that inflation may return to the tolerance band by the end of this year.

” Thanks to proactive central bank measures and the effects of the epidemic and the gradual reduction of external inflationary effects, tax-filtered core inflation is on a declining path from the second half of next year. Inflation will return to the central bank tolerance band in the fourth quarter of 2022 and will reach the 3 percent central bank target in the first half of 2023. The consumer price index will be 4.7–5.1 per cent in 2022, in line with the inflation target from 2023. ”

Monetary Council meeting of 14 December 2021.

Development of commodity prices

Significantly higher raw material prices due to the epidemic Most news is about energy prices, but automotive raw materials such as aluminum, steel and rubber are experiencing similar increases in prices.

The first half of 2021 was marked by exceptionally high price increases in the commodity market, as demand doubled with economic reopening following the easing of the coronavirus epidemic, while the supply side caught up more slowly. Our most important raw material is crude oil, which rose 44% last year. Economic analysts are divided on the further development of the oil market, but agree on one thing, the rise in prices will not stop.

Rises in some commodity prices over the past year:

Metals: Aluminum: ↑63% – Copper: ↑42% – Stainless steel: ↑50%
Plastics and rubber: PVC: ↑55% – Abs: ↑25% – Pet: ↑55% – Vinyl: ↑107% – Nitrile: ↑69%
Shipping:  to China-Europe: ↑385%
Energy: Oil: ↑44% – Electricity in Europe: ↑169% – Gas in Europe: ↑486%

The reasons for the continuous price increases are the following:

  1. Simultaneity – The simultaneous relaunch of global economies following the health crisis has caused massive demand
  2. Growing demand – Strong global demand – especially in Asia – leading to shortages of raw materials first and significant price increases
  3. Transport problems – Continuous disruption of the global supply chain, congestion in ports and lack of transport capacity

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Contact Erika Korver