According to an analysis, Mercedes-Benz with CEO Ola Källenius (54) was the most profitable of the world’s largest car companies last year. Profitability – measured by the EBIT margin, which relates operating profit to sales – was 12.8 percent. This emerges from the analysis by the auditing and consulting company EY, which examined the financial indicators of the 16 largest car companies in the world.
According to the information, Mercedes leads the ranking list Opel-Mother Stellantis (12.1 percent) and BMW (11.9 percent). In contrast to the second and third places, Stuttgart’s margin fell compared to the previous year. However, the largest decline was recorded in 2023 Tesla: The electric car manufacturer’s margin fell from 16.8 to 9.2 percent compared to the previous year, putting the company in the middle of the field. The Volkswagen-Group landed in tenth place. The US car manufacturer Ford came last.
In the fourth quarter, however, the picture became murkier compared to the whole year: sales rose below average by nine percent and profits fell by five percent. EY market observer Constantin Gall said: “Last year the industry was able to benefit from high new car prices and the restored ability to deliver. However, the problems facing the industry have also become increasingly clear.”
Industry is facing several problems
Gall identified the weakening economy as a problem for the industry. Sales of new cars are therefore well below pre-Corona levels: last year, manufacturers sold around 66 million cars, and in 2019 there were almost 76 million vehicles. The result: “Overcapacity is currently a real problem for manufacturers, but also for suppliers. And there is currently no sign of an economic improvement that could lead to a real surge in demand,” said Gall.
The slow ramp-up of e-mobility is also putting a strain on business: “Billions of investments were made in the hope of a rapid increase in demand for electric cars, and now doubts are growing – in politics, in the industry and among customers,” said Gall. The current billions in profits are almost exclusively due to combustion engine models. It will be a long time before the industry makes real money with electric cars.
In addition, sales are stalling China: With the exception of Volkswagen and BMW, all manufacturers examined will have sold fewer cars on the Chinese market in 2023. On average, sales there fell by 5.4 percent. Chinese electric car makers are also increasingly attacking established manufacturers in their home markets, Gall said. This challenge will become even greater in the coming years.
Car companies are making record profits – also thanks to special effects
Overall, the car companies generated total sales of a good two trillion euros last year due to high new car prices and a sales increase of seven percent. According to the analysis, that was 13.7 percent more than in 2022. Earnings before interest and taxes (EBIT) rose by a good 15 percent and reached around 176 billion euros. However, an important reason for the increases was a special effect: The weak yen helped Japanese car companies to increase profits by around two thirds and increase sales by 22 percent. The rest was less dynamic: German manufacturers recorded a combined profit growth of seven percent, while US companies’ earnings even slipped by almost 30 percent.
Profitability increased slightly: the average EBIT margin, which compares operating profit to sales, was 8.6 percent. This means it remains at a level of more than eight percent for the third year in a row. For comparison: In the five years before the outbreak of the corona pandemic, the profit margin was an average of 5.5 percent.