Status: 11/28/2022 09:59 am
According to a study, the world’s largest car manufacturers continue to make record profits. And despite the economic downturn, premium cars of all things should continue to sell brilliantly.
Despite global economic concerns, inflation and a worsening corona situation in China, the world’s largest car manufacturers have not only been spared a real crisis so far – they are also continuing to make record profits. This was the result of a study by the management consultancy EY.
“The bottom line is that the third quarter was a dream quarter for the auto industry, despite the slowing economy and a very difficult geopolitical situation,” said Constantin Gall, head of EY’s Western Europe mobility division. The supply of semiconductors is slowly improving, and the demand for premium vehicles in particular is still high.
Luxury pays off for automakers
The situation is different for the cheaper models, which are sold in large numbers and where the profit margin is lower. According to EY industry consultant Peter Fuss, the market for volume manufacturers in particular could come under pressure in the future. “We are currently experiencing that large sections of the population in important sales markets are having to accept a significant loss of purchasing power. This means that fewer and fewer people can or want to afford a new car.”
Manufacturers of high-priced cars, on the other hand, will be more likely to avoid discount battles. The challenge for companies is to keep price enforcement at the current level as far as possible, says Fuss: “Discount battles squeeze the margin and damage the image. If you manage to keep your own product desirable and scarce, you don’t need discounts. However, that will be more possible in the premium segment than in the volume segment.”
Tesla particularly profitable
Tesla was again ahead in terms of profit margins, so the Californian electric car manufacturer is particularly profitable. Profit margin is the percentage of profit in sales. Tesla achieved a margin of 17.2 percent, ahead of Mercedes-Benz (13.8 percent) and BMW (9.9 percent). At 7.3 percent, the average margin of the companies examined was exactly the same as in the previous year and thus significantly above the pre-pandemic level. Between 2013 and 2019, car companies had an average profit margin of 6.1 percent.
German manufacturers strong
According to EY, between July and September both the total profit from ongoing operations and the total sales of the 16 analyzed companies were at the highest level ever recorded in a third quarter. In terms of the operating result (EBIT), Mercedes-Benz was the world leader and, at around 5.2 billion euros, was well ahead of Volkswagen, which ranked second at 4.7 billion euros. BMW was in fifth place with 3.7 billion euros. The world’s largest carmaker Toyota, on the other hand, faltered and had to accept a 25 percent drop in profits.
In terms of sales, Volkswagen led the ranking with 70.7 billion euros in the third quarter, ahead of Toyota with 66.3 billion euros. Stellantis is in third place with 42.1 billion.
tailwind from China
Even in the recently restrained Chinese market, things went uphill again for car manufacturers. The German manufacturers increased sales by 28 percent compared to the same quarter of the previous year, after the figures had recently tended to decline. Mercedes-Benz grew the most with a plus of 67 percent. However, the Stuttgart-based company recently had to lower the prices for some models in China. “In China, the trees no longer grow in the sky, the market is very competitive and demanding,” said Fuß.
The study authors’ view of the development of company values is interesting. The market capitalization of the 16 largest automakers fell 35 percent year to date to $1.293 trillion as of Nov. 10, despite all records. Tesla was hit particularly hard, the company’s market value fell by 43.4 percent.
Nevertheless, Tesla is by far the most valuable carmaker with a value of $602 billion as of the reporting date. The remaining 15 corporations together are worth around 700 billion.