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High Profitability Targets Set For Car Companies In 2023

  • Written by : Ashton G. Curran
  • Date Published : 2023-04-11
  • Date Updated : 2023-04-11
  • Category / Tag : articles
High Profitability Targets Set For Car Companies In 2023
In 2022, the sales of the top 16 global car manufacturers increased by 18%, reaching 1.87 trillion euros, while operating profit climbed by 16% to just under 157 billion euros, according to the consulting firm Ernst & Young (EY). Sales and profit growth continued to rise in the fourth quarter, reaching 24% and 19%, respectively....

This performance was achieved despite a 3% decline in new car sales, with the fourth quarter showing a small increase of 1.1%.

Volkswagen (VW) led the ranking with 279 billion euros in sales and 22.1 billion euros in profit, followed by Toyota and Stellantis.

The automotive industry is in a record-breaking phase, with high demand and considerable delivery issues leading to record sales and profits.

According to Constantin M.

Gall, the managing partner and head of mobility at EY for the Europe West region, global sales could increase up to 10% this year due to the improving supply of semiconductors and primary products.

Gall believes that the main challenge for car manufacturers will be to keep prices high and avoid cuts in margins.

The weak economy may lead to a decline in demand in the volume segment, and Gall suggests that reducing prices is not the solution as margin should come before volume, and discounts may affect image and margins.

Electromobility is another challenge, with few companies currently making a significant profit from electric cars.

Peter Fuss, partner at EY, highlights the need to adapt production, the product portfolio, and pricing to achieve high profits with electric cars.

In the margin ranking, Tesla led the 16 companies examined with a 16.8% margin, followed by Mercedes-Benz and Stellantis.

The average margin for the companies examined was 8.4%, only slightly lower than the previous year.

German car manufacturers have recorded a decline of 3% in new car sales in China, while the sales of the analyzed companies in China fell by 12% last year.

China's share of the total sales of the three German companies shrank for the second time in a row to 36.6%.

Despite production bottlenecks and temporary plant closures, sales generated in Germany reached a record of 506 billion euros, with a growth of 23%.

The number of employees fell for the fourth year in a row, decreasing by 1.5% to 774,000.

Overall, many car manufacturers have set high profitability targets for this year.

According to Fuss, some companies may not achieve their targets, as the headwind is getting stronger with the weakening economy, normalization of the delivery situation, and the pandemic order buffer being worked off.

The time of dream margins may soon be over for some companies, and the market has become very competitive and demanding.