The world’s largest automakers have recently had to accept profitability cuts, according to a study by the consultancy EY. According to the analysis, sales in the first quarter of the year rose about 19 percent over the same period last year, but earnings before interest and tax (EBIT) lagged behind with growth of 6.1 percent. Sales increased by only four percent.
Profitability – measured by the EBIT margin, which compares operating profit to sales – fell from nine percent to eight percent. The new margin leader among the 16 automakers 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, was fourth with 11.4 percent.
In recent months, Tesla has only managed to boost its turnover with substantial discounts, which means that the margin is now under pressure. In contrast, most other automakers tried to stabilize their prices, which had risen sharply in recent years, which reduced sales but allowed for relatively high margins.
However, the consultancy EY believes that prices will not remain stable for long: “For the first time since the beginning of 2021, we see clear signs of a slowdown in earnings, which are no longer growing as fast as sales,” said Constantin. Gall, head of EY’s Western Europe mobility division, said 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 automakers to push high car prices into the market and forego discounts. “The days of dream margins will soon be over for some companies.”
In addition, most manufacturers currently make significantly higher profits with combustion engines than with electric vehicles, says EY industry advisor Peter Fuss. Manufacturers must succeed in getting electric cars to produce more. And: “More cost discipline cannot be avoided, otherwise there is a permanent threat of significantly lower profitability.”
(t online)
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I’m Ella Sammie, author specializing in the Technology sector. I have been writing for 24 Instatnt News since 2020, and am passionate about staying up to date with the latest developments in this ever-changing industry.
