What's going on?

Data out on Tuesday showed that European car sales fell for the sixth-straight month in December, and you can�t help but feel the region�s industry has run out of gas.

What does this mean?

Europe�s carmakers still don�t have enough chips to keep up production, and their sales are suffering as a result. Just look at Germany�s stalwarts: Volkswagen, BMW, and Mercedes-owner Daimler sold 30%, 22%, and 15% fewer cars last month than the same time the year before, causing the country�s overall sales to drop 27%. And since Germany is Europe�s biggest car market, the region saw its sales fall by 22%. That�s left carmakers with one option: shift production to higher-end, more profitable vehicles to try to offset some of the damage.

Why should I care?

For markets: Get used to it.
Trouble is, consulting firm EY thinks this year will be as difficult for carmakers as the last, and it might well be right: China�s zero-tolerance Covid policy has already led to factory shutdowns across the country, which produces around a third of all cars globally (tweet this). In fact, two of the world�s top-selling carmakers � Toyota and Volkswagen � have been forced to halt a few of their production lines just in the last week or so. And that�s before you get to the minor problem of convincing inflation-hit drivers to open their wallets�

The bigger picture: Once bitten, twice shy.
The absence of new cars might be why the average price of used ones hit $28,000 in the US last month. That�s fueling a much bigger problem: the country�s consumer prices rose 0.5% in December versus the month before, and second-hand cars are estimated to be responsible for at least a fifth of that. America isn�t able to unring that bell, but it won�t let it happen again: the government�s planning to invest billions into chip production, in hopes there�ll always be plenty of new cars going spare.