Peter laughing, John crying. If the spectacular rise in steel prices over the last two years (nearly 70%) is pleasing to the giants of the steel industry, it is not doing the car manufacturers’ business. Last year, the rise in material costs (and other external costs) weighed 358 million euros on the results of the PSA group, while the negative impact reached 394 million at Renault “reflecting largely the rising prices of steel, “says the group in its reference document.
900 kg of steel per car
With an average weight of 900 kg per car, or 67% of its weight, steel represents a significant part of its manufacturing costs. “Commodities account for around 8% of a vehicle’s original selling price,” say Deutsche Bank analysts in a recent report. Of which about one third for steel.
The impact of the increases is however not the same according to the manufacturers. First, because the relative weight Steel in the value of a car varies from model to model. “It’s not quite the same depending on whether the car is sold for 9,000 or 40,000 euros,” says Gaetan Toulemonde, an analyst at Deutsche Bank. In addition, builders generally conclude contracts over several months, or even years. “There can be extremely important variations in a quarter,” says the analyst. “Depending on when the manufacturer renews its contract, the impact of raw materials is more or less high.”
Compensated impact
Soaring steel prices will certainly not be neutral for European manufacturers this year. Deutsche Bank estimates that the raw materials will cost Daimler € 200 million, BMW € 100 million, Renault and PSA € 400 million, and “probably more to Volkswagen”. “But we continue to count on a rise in the profits of European manufacturers, believing that the impact of currency and commodity effects will be fully offset by volume growth, savings, more discipline in selling prices”, write the analysts.
As for American builders, they do not really have to thank Donald Trump, whose protectionist initiatives have raised prices of steel across the Atlantic by some 200 euros since February.