Cars keep getting pricier and the commodity boom makes it worse

TheStar Mon, May 10, 2021 09:10am - 2 years View Original


Worries ahead: Autonomous robots assemble an X model SUV at the BMW manufacturing facility in South Carolina. BMW expects US$1.2bil headwinds from rising commodity prices for the year. ─ Reuters

MANCHESTER: Cars are back in vogue courtesy of the pandemic. They’re also getting more expensive, thanks in part to surging commodity prices.

Many of the essential ingredients for automakers, such as copper, steel and aluminum, are hitting or approaching record highs this year as the lagging supply can’t keep up with stimulus-driven demand. The Bloomberg Commodity Spot Index jumped to its highest since 2011, with metals up 21% so far this year.

Should the current rally morph into a supercycle, rising car prices could forebode inflation across the board. Analysts at JPMorgan Chase & Co estimate the price of an auto’s raw materials have climbed 83% in the year through March. Those pieces typically make up about 10% of the cost of building a vehicle, meaning the price tag for a US$40,000 (RM164,499) car would have to increase 8.3% to offset the rally, analysts for the bank wrote.

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