By Ben Klayman

DETROIT (Reuters). Volkswagen AG’s Americas chief believes the world will experience a global shortage of chips in the third quarter next year. But, he also predicts that the automobile industry will keep the same discipline that led to high vehicle prices and strong corporate profits, even if the supply of semiconductors increases.

The COVID-19 closure last year, and subsequent chip shortage resulted both in lower vehicle inventories and strong profits for most businesses. Scott Keogh (CEO VW Group of America) is confident that the industry can continue to make these gains without resorting to old bad habits.

    “When the market springs back, it’s not going to hold obviously exactly the way it is,” he said in an interview. The market will get more competitive. However, the direction of the trend, which began with the housing crises and carried on through COVID, the chip shortage, and will remain true will mean that it will stay strong.

Keogh stated that “There is probably no industry more adept at degrading margin value than the automobile industry.” They get in price wars, and then everything goes to seed. My optimism is higher.

    He thinks executives don’t want to return to the days of high new-car inventories, massive retail discounting and flooding the rental market.

    “Granted, one rogue actor can certainly throw a wrench into the machine,” Keogh said. The companies are looking at the balance sheets of their factories and thinking, “We found a way to make this work.”

As the US industry recovered from the last year shutdown, VW’s new-vehicle sales increased more than 21% between November and December. But, 2022 growth will be less normalized as there is still a chip shortage, Keogh stated.

According to him, the U.S. automotive industry will rebound more slowly which will allow carmakers maintain price and production control. He does however see prices rising for new vehicles easing as chip production stabilizes and carmakers focus more on high-margin sales. Keogh explained that prices are not inexhaustible.

The rollout of electric vehicles will also force carmakers into pricing discipline. He stated that companies need to drive down the prices in order to draw buyers and maintain a profit margin.