Economy Profitability of Automakers Drops to 10-Year Low

The second quarter turned out to be a bad one for the automotive industry: The overall profit of the 16 largest automobile groups fell by 18 %. Only four of these 16 OEMs were able to increase their sales compared to the previous year.

Ten of the world's 16 largest automotive groups suffered a decline in profits in the second quarter. (Source: Daimler)

Demand in the global automotive market is weakening. The figures presented in the manufacturers' balance sheets were correspondingly poor. The total profit of the 16 largest automobile groups fell by 18 %, while worldwide sales of new cars declined by 5 %. Only four companies sold more new cars than a year ago: Mitsubishi, Honda, Toyota and BMW. Overall, the industry still grew slightly in terms of sales - thanks to SUVs. But in view of enormous costs, the industry has been operating at profitability levels almost as low as ten years ago, the management consultancy firm Ernst & Young (EY) estimated in a recent analysis.

“The global automotive industry is experiencing a sales and profit crisis, which is currently primarily due to the economic situation,” said EY expert Constantin Gall. Declining margins and fierce price pressure from shrinking sales markets are already a challenge. This situation is exacerbated by high investment requirements in autonomous driving and electric mobility. Further cooperation and partnerships are to be expected for the companies to master the challenges that lie ahead, including stricter emission limits, Gall said.

Huge Losses for American and French OEMs

The sharpest declines in sales were recorded by the US manufacturers (minus 9 %) and the French groups (minus 10 %). In the ranking of the best-selling automobile groups, Toyota was slightly ahead of Volkswagen (minus 2 %) owing to a sales growth of 4 %. Despite weak results - Daimler even made a loss in the second quarter - the consultants nonetheless anticipate a promising future for the German automotive industry. The drop in sales was comparatively small, and the weak profit trend was due in particular to one-off effects. “The German companies have been clearing the balance of old burdens,” said EY expert Peter Fuß. For instance: the Diesel crisis, cartel allegations, the WLTP-conversion. Operationally, however, things are not looking that bleak.

This article was first published by Automobil Industrie.

Original by Svenja Gelowicz / Translation by Alexander Stark

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