Auto giants soar in revenue and profits, EY reveals
The globe's top vehicle manufacturers have seen a substantial boost in sales and earnings recently. In Q3, the 16 top car manufacturers' sales surged by 11% to an impressive 504 billion euros, marking a 35% growth in earnings before interest and taxes (EBIT) to 39 billion euros. This staggering increase is courtesy of Ernst & Young (EY)'s auditing and consulting analysis . Currency effects, notably in Japan where the weak yen fueled a 103% increase in profits for Japanese manufacturers, were a significant factor contributing to this upward trend.
Mercedes-Benz dominates profitability rankings
The profitability ratio, calculated as the EBIT margin (operating profit to sales), inched up slightly from 7.2% to 8.6%. Mercedes-Benz emerged as the most profitable manufacturer with a 13% margin, closely followed by Toyota at 12.6% and BMW at 11.3%. In contrast, Volkswagen overtook the finish line with a 6.2% margin .
Although the world automotive industry is experiencing rough waters, Constantin Gall, an automotive expert and EY's Western Europe head of mobility division, deemed 2022 as a tougher year. He attributed this to weakening demand for new cars, slower electromobility rollout, and intensifying price pressure . Struggles with launching new models worsen profitability as low sales paired with higher development costs bear down on the industry .
Discounts and favorable financing revive ailing markets
As a response, many manufacturers are resorting to discounts, special models, and attractive financing deals to keep pace with consumers' changing expectations . While these moves often pressure profit margins, Gall noted the importance of cutting costs to regain competitiveness . Complex internal bureaucracy and entangled processes within companies draw away financial resources, hence the need for willful simplification.
Challenges aplenty as the industry gears up for EV transformation
The industry's transition to electric mobility is crucial yet fraught with concerns about consumer reluctance. Despite the influx of new EV models, the reluctance of consumers remains a worry for the EY expert .
Despite rising sales and profits, discernible caution arises among consumers, resulting in some manufacturers offering discounts and appealing financing options to preserve their market share.
Sources:
[1]
[2] Enrichment data
[3] Enrichment data
[4] Enrichment data
[5] Enrichment data
