"The days of dream margins will soon be over" - German car manufacturers have to dress warmly

Created: 08/26/2022, 09:21

Despite the lack of semiconductors, many car manufacturers have recently earned top earnings.

But the times of gold-rimmed balance sheets may now be over, experts warn in a recent study.

Stuttgart – According to the consulting company Ernst & Young (EY), car manufacturers will have to adapt to a more difficult business environment in the future despite high sales.

"The days of dream margins will soon be over," said EY industry consultant Peter Fuss, based on an analysis of key figures from the world's 16 largest car companies published on Friday.

The reason is, among other things, that the supply of semiconductors should normalize in the coming months and that car production could pick up speed again.

Car manufacturers have to adapt to the energy crisis and recession

So far, the lack of chips had acted as a limiting factor, explained the head of mobility division Western Europe at EY, Constantin Gall.

“The rare semiconductors are mainly installed in high-margin vehicles;

at the same time, the manufacturers hardly have to grant any price reductions, but can even enforce price increases in some cases.” This has recently driven sales up.

ABB robots work on the body of various car models.

© Sven Hoppe/dpa

According to Fuss, there are currently increasing problems on the demand side due to the energy crisis and the impending global recession.

There is also no sign of relaxation in the material, logistics and energy prices.

The sales market in China also continues to weaken.

In the second quarter, sales for the industry giants collapsed by 24 percent.

BMW, VW and Mercedes-Benz together recorded a minus of 19 percent.

VW and BMW lose profitability

According to the study, car companies worldwide achieved significantly higher sales from April to June 2022 despite lower sales figures compared to the same period of the previous year.

However, the average profit margin, i.e. the share of operating profit in sales, fell from 9.8 percent to 7.9 percent.

The industry is thus approaching the numbers before the corona pandemic again.

Among the German car manufacturers, VW and BMW in particular lost profitability.

Mercedes-Benz was able to roughly maintain the value from the same quarter of the previous year.