Inflation Is Great If You Have Pricing Power. Just Ask Mercedes.
With input costs soaring, all investors care about is which companies have pricing power (and which don’t). Some lessons from the automotive industry.
Even more luxe.
Photographer: JADE GAO/AFPFor years, Mercedes-Benz Group AG’s profits failed to match the desirability of its luxury vehicles. Now, semiconductor shortages have given it the perfect cover to hike prices and prioritize production of its most expensive high-performance models.
The impact on earnings has been stunning. Mercedes reported a 15% operating profit margin during the final three months of 2021 — about double the car unit’s average return during the past decade. With inflationary pressures building across the supply chain, there could be no better demonstration of the benefits of the German giant’s pricing power.