My analysis of the annual financial results of most Western automakers and some major Chinese automakers showed attractive results for the fiscal year between January and December 2022.
The analysis includes information relating to 25 different companies from around the world. This includes eight Japanese brands (Isuzu, Subaru, Honda, Toyota, Mitsubishi, Mazda, Nissan and Suzuki); seven European companies (Ferrari, Mercedes-Benz, BMW, Stellantis, Volkswagen, Renault and Aston Martin); five from China (BYD, Great Wall, Geely, Xpeng and NIO); three in the US (Tesla, General Motors, Ford); Hyundai Group in South Korea and finally India’s Tata, which includes Jaguar Land Rover.
Europe in the lead
The first interesting fact that emerges from this analysis is that European manufacturers lead the ranking of profitability compared to the rest of the world. In 2022, European carmakers made almost 79 billion euros ($87.3 billion) in operating profit, on total revenue of more than 804 billion euros ($888.5 billion).
That means its combined operating margin was 9.8 percent. The result was the best among all geographical areas and even 0.5 points above the 2021 results.
Part of the positive result can be explained by the ability of these companies to turn a problem into an opportunity. The main problem facing all global car manufacturers in 2022 was the supply chain crisis. It was not possible to maintain high production rates because parts/drivers were not available. Consumers around the world have been forced to wait months to get a new vehicle.
Although this situation had a negative impact on sales, it was the best opportunity for manufacturers to reduce inventories, increase production efficiency, and consequently improve profitability. Both manufacturers and consumers have learned to live with this new reality and, although it is still a pain for the latter, the former have gotten used to it and have treasured it.
Ferrari is unbeatable
The other big takeaway from the financial analysis is that Ferrari is still the absolute king of profits. Although operating margin fell by a percentage point between 2021 and 2022, the Italian automaker is unbeatable, even compared to second-place Tesla.
Last year, Ferrari delivered 13,221 new cars worldwide, contributing to a total turnover of 5.09 million euros ($5.6 million). Of that total, the company earned 1.22 million euros ($1.35 million) after paying operating expenses. In other words, Ferrari earned 24 cents for every euro of sales. That’s a huge amount compared to the industry average of 7.6 cents. And the best is yet to come, as the Thoroughbred has yet to work its SUV magic in terms of revenue.
Tesla was the second most profitable company and the one with the largest increase in operating margin between 2021 and 2022. Tesla’s margin increased from 12.1% in 2021 to 16.8% last year. Musk’s company is one of the few cases of profitability in the electric vehicle segment. There are multiple reasons for this: more cars sold, lack of new car development (the Model Y is the newest and was introduced in 2019), and greater economies of scale.
And China?
It is difficult to get a complete picture of the Chinese industry, as many of its big companies also produce cars for Western brands through joint ventures. However, based on the little information available, the situation is quite heterogeneous. Great Wall had the highest return at 6.8 percent, followed by BYD and Geely. In contrast, Xpeng and NIO, the two electric vehicle startups, posted heavy losses in 2022.
The author of the article, Felipe Muñoz, is a specialist in the automotive industry at JATO Dynamics.
