Inflation jeopardises electrification through uncertainty | Automotive World

From mid-2021, countries around the world experienced an inflation surge. Initially attributed to the economic shocks caused by COVID-19 and its disruption of supply chains, the problem was exacerbated by Russia’s invasion of Ukraine in early 2022, which caused steep rises in global prices for food and energy.

The effects of these events were quick to manifest in the automotive industry, particularly in Europe. With the cost of materials and products rising across the board—including steel, gas, and plastic—a quick post-pandemic recovery became unlikely. As a result, Moody’s revised its 2023 regional light vehicle sales projection from 15.6 million to 13.1 million, only 8% higher than the previous year.

From 8.7% in 2022 to 7% in 2023, global headline inflation is expected to continue declining slowly for the foreseeable future, according to the International Monetary Fund. Despite an apparent end to the surge, Randy Miller, Global Advanced Manufacturing & Mobility Leader at EY, tells Automotive World that inflation and its associated impact on interest and exchange rates will have a lasting effect on vehicle prices. “These aren’t new issues, but the current mix is creating challenges that will likely remain over the medium term.”

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