Who would’ve believed that ? Barely a year ago, Tesla’s meager profits came largely from sale of CO2 credits . Today, against all odds, the champion of the electric car has also become the champion of profitability in the automotive industry.
According to the ranking established by the firm EY based on the 2021 accounts of the world’s leading 16 manufacturers (excluding Chinese and Indian, and adjusted for currency effects), Elon Musk’s firm generated an operating margin last year ( Ebit on turnover) of 12.1%, ahead of the German premium manufacturers BMW and Mercedes. The American company has generated $5.5 billion net profit in 2021, by selling 936,000 cars. The ranking of manufacturers according to profitability is, to say the least, different from the Top 10 by volumes .
Scale effects
The automotive troublemaker benefits – finally – from its original “business model”, based on strong integration, from battery manufacturing to associated services. “Tesla also relies heavily on simplicity: a reduced range, few options”, comments Philippe Houchois, analyst at Jefferies.
Under these conditions, any increase in volumes now has a multiplier effect on profitability. The operating margin of the automotive business increased further in first quarter of this year, at 19.2% . An all-time high in the industry, excluding luxury car makers like Ferrari.
At 12%, BMW and Mercedes regain their place at the top of the table, logical for manufacturers of “premium” cars, more profitable. “Buyers with high purchasing power have not really suffered with the pandemic, which has favored sales of more expensive vehicles”, recalls the analyst.
The performance of Stellantis , born in early 2021 from the merger between PSA and FCA, was more surprising. For a generalist, generating a margin of 10.6% (unadjusted for exceptional items), worthy of “premium” manufacturers, is quite an achievement. The group benefited like the whole industry from the shortage of chips, which enabled it to concentrate its sales on the most profitable cars. But he also realized synergies linked to the merger, and was shaken by the drastic methods of his boss Carlos Tavares to cut costs.
Volkswagen, rather average profitability
The traditional champion of generalists, Toyota, is on its side remained well positioned , at 10.4%. The world number one by the number of vehicles sold benefits not only from sharp management, which enabled it to suffer less than its competitors from shortages last year, but also from a particularly well-balanced geographic mix. “Toyota is the benchmark in the sector, particularly for the stability of its results over the years,” notes Philippe Houchois.
Against the top of the class, “the predominant manufacturers in Europe fared less well, because the market there is ultra-competitive, and fell in 2021: the volume sales of our panel (excluding Tesla) fell there 2.7% last year,” notes Aymeric de La Morandière, partner at EY. The profitability of the Volkswagen group , which makes 40% of its sales on the Old Continent, remains rather average, at 7.7%, compared to other major manufacturers in the sector.
Finally, the three manufacturers of the Renault-Nissan-Mitsubishi Alliance are at the bottom of the ranking, recovering from the difficulties encountered in recent years. Already weakened by the race for volumes wanted by Carlos Ghosn, then by the crisis following the spectacular arrest of their ex-boss, they had all three plunged into the red in 2020, hit hard by the health crisis. Operating margins generated last year ( 3% at Renault, 2% at Nissan) reflect not only the restructuring efforts undertaken over the past two years, but also the general upturn for the entire sector. Whether this improvement will last remains to be seen.