Signal price

Soaring commodity prices signal price hikes for auto parts

Image by Sebastian Gollnow // Getty Images

Over the past two years, raw material costs have skyrocketed by 200-300%, and parts suppliers are feeling the pressure. Bosch announced at its annual earnings press conference Wednesday that pressure on parts suppliers necessitated price increases to offset the burden. Inevitably, these price increases will trickle down to the manufacturer and the end consumer, particularly those who bring in vehicles for customer-charged repairs and over-the-counter parts sales.

During this conference, President of Robert Bosch GmbH, Dr. Stefan Hartung, mentioned that the company expected to achieve an EBIT (earnings before interest and tax) of at least 4% throughout the year, in line with the results of 2021. rising commodity prices.

But that’s not possible with raw material costs like steel, aluminum and copper rising to record highs, and maintaining the status quo will result in 2022 EBIT of around $2. 8%.

Price increases would generate EBIT above the 4% threshold without increasing prices. Hartung said, “We can’t settle for 4%.”

Markus Forschner, CFO of Bosch said: “The burden on our result is increasing significantly due to the sharp increases in the cost of energy, raw materials and logistics.” It is not only car manufacturers who have to pass on price increases, but above all suppliers like us too. »

Retail Level Increases

Automakers have posted bumper profits despite the pandemic — General Motors reported net income of $10 billion in 2021 and a net profit margin of 7.9% — but there’s only room to maneuver limited to absorb cost increases from parts suppliers like Bosch. Margins on new vehicles can have small buffers, but retail parts are another story.

For independent parts dealers and retailers, as well as service shops, the price of parts is expected to increase in line with cost increases seen by Bosch and other Tier 1 suppliers. Parts pricing matrices tend to be based on cost for the OEM, and components from wiper blades and alternators to spark plugs will see a price increase that won’t go unnoticed by consumers.

When it comes to parts shortages, previous material price hikes and supply chain issues, consumers around the world are already pay almost 50% more than they would have paid for in 2013. Some coins grew by 67% or more during this period. This expected price hike from the highest-volume auto parts maker will add to the challenges faced by customers in the service and parts departments.

Recognize the increase

With the part price increases coming, dealers and other retailers will pass the increases on to consumers, buyers who may feel like they’ve been ripped off. When the update reflects a significant price change, let customers know why.

Proactively post a note of apology in the office, explaining that rising commodity costs have driven supplier prices higher, forcing prices higher. It’s not due to a fault, but it’s about keeping the lights on from the factory to the driving department. Deflecting the customer’s frustration away from the dealership can help prevent their anger in person and during investigations.

Did you enjoy this article by Jason Unrau? Read more articles on CBT News here. Please share your thoughts, comments or questions regarding this topic by submitting a letter to the editor here, or contact us at [email protected]

Be sure to follow us on Facebook and Twitter to stay up to date or catch up on all of our on-demand podcasts.

While you’re here, be sure to subscribe to our email newsletter for all the latest automotive industry news from CBT News.