Study calls for cost discipline
Automakers are less profitable
05/29/2023, 09:23 am
The world’s largest car manufacturers are registering huge jumps in sales. Sales and profits cannot keep up – profitability is falling. Experts urge cost discipline.
According to a study by the consulting firm EY, the world’s largest car manufacturers have recently had to accept cutbacks in profitability. According to the analysis, sales in the first quarter of the year rose by around 19 percent compared to the same period last year, but earnings before interest and taxes (EBIT) lagged behind with growth of 6.1 percent. Sales increased by only four percent.
Profitability – measured by the EBIT margin, which puts the operating result in relation to sales, fell from nine percent to eight percent. The new margin leader among the 16 car manufacturers analyzed was the Stuttgart-based company Mercedes-Benz with an EBIT margin of 14.7 percent. Followed by BMW (14.6 percent) and Kia (12.1 percent). Former leader, electric car maker Tesla, came in fourth with 11.4 percent.
“For the first time since the beginning of 2021, we are seeing clear signs of slowing down in profits, which are no longer increasing as rapidly as sales,” said the head of mobility division Western Europe at EY, Constantin Gall, according to the announcement. The market is normalizing. “A new car will soon no longer be the scarce commodity it was last year,” said Gall. It is therefore becoming increasingly difficult for car manufacturers to push through high vehicle prices on the market and to forego discounts. “The days of dream margins will soon be over for some companies.”
In addition, most manufacturers are currently making significantly higher profits with combustion engines than with electric vehicles, said EY industry consultant Peter Fuss. Manufacturers must succeed in making electric cars produce more. And: “There is no way around more cost discipline, otherwise there is a permanent threat of significantly lower profitability.”