Luxury Carmakers Worry That Sales Will Soon Suffer After Breaking Records in 2021

The coronavirus (COVID-19) pandemic seems to be one of those global events that affected everything, from toilet paper to luxury cars. No market and no industry was immune, no pun intended. Last year, countless companies were tested to their very limits. Many business owners and corporate executives were holding out for a better and more prosperous 2021. This turned out to be a good call as car sales in 2021 have been flourishing. However, as luxury carmakers face a chip-demic and the pandemic continues with new surges, the feast of car sales may turn back into famine.

Record-breaking luxury car sales in 2021

The Land Rover Discovery MHEV model driving on a country highway
The Land Rover Discovery MHEV | Jaguar Land Rover North America, LLC

According to Auto News, “The luxury-vehicle segment is on a post-Covid high with sales surging 63 percent in the second quarter compared with a year ago.” The luxury vehicle segment is reaping huge profits thanks to lifting coronavirus restrictions throughout the United States, particularly in metropolitan regions where luxury car markets are the strongest.

During Q2 2021, premium brands sold nearly 625,000 vehicles, outpacing the broader industry’s 49% increase, Auto News reported. Nonetheless, Q3 and Q4 2021 are looking to dispirit the euphoria with the ever-looming semiconductor shortage. Major marques such as Ford and General Motors have already been forced to cut production on some models as the global semiconductor shortage worsens. As a result, thousands of automotive employees have been affected as plants temporarily shut down.

The Auto News article continues: “Mercedes-Benz said last week that chip scarcity affected global deliveries in the second quarter, and especially in June. The drag on sales is expected to continue through year-end, the automaker said.”

British luxury car company Jaguar Land Rover is also troubled by the dynamic supply chain disruption. A spokesperson for the company stated that Q3 wholesale volume is projected to drop by 50%, much lower numbers than previously anticipated.

It seems cars got too smart too fast

If you happened to drive past a luxury car dealership in the past few months and observed less inventory than usual, you might have figured cars were flying off the lots. Well, you’re likely correct about that, but dealerships are also suffering record-breaking shortages as well. The primary issue is a global supply chain interruption that shows no sign of improvement.

A shortage of semiconductors is at the forefront of this vehicle supply chain disruption. Semiconductors are vital components for everything vehicle-related, ranging from infotainment systems to engines and electric motors. So, what’s the big deal? There can’t be that many semiconductors going into vehicles, right?

The problem is that the booming auto industry has to compete with billions of consumer electronic devices requiring semiconductors. Furthermore, as automobiles get smarter, they require more microchips. Many modern vehicles use no less than 50 on average. It goes without saying that other luxury marques such as Lexus, Mercedes-Benz, and BMW have also joined the sales slump club.

Interestingly, certain luxury car brands are still basking in the sun — especially when it comes to EVs. Porsche, Genesis, Audi, Tesla, and even Volvo continued to experience relatively healthy sales of plug-in models. Likewise, even as Volvo saw drops in the sales of its gas-powered models, sales of electrified models rose 54%, as pointed out by Auto News.

Which luxury carmakers are most likely to survive Q3 and Q4 2021?

Semiconductor crisis aside, people and organizations still need transportation. Despite the challenges facing the global automobile market, the world keeps turning. So, which carmakers are most likely to survive the second half of 2021? Furthermore, what about 2022 and throughout the rest of the decade?

The answer is electrification, for both luxury cars and standard fare. The writing has been on the wall for quite some time and is now getting to the point in our modern history that either we choose to transition gracefully to EVs or certain events will instead push and shove us in that direction. If history has taught us anything, change will occur one way or another. So, the carmakers that have invested in the future will survive beyond 2021.

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