Tesla, new for-profit carmaker

Who would have thought that? Just a year ago, Tesla’s meager profits came largely from the sale of CO2 credits. Today, against all odds, the electric car’s champion has also become the champion of profitability in the car industry.

According to the ranking established by the EY firm based on the 2021 accounts of the world’s 16 largest producers (excluding Chinese and Indian, and adjusted for currency effects), Elon Musk’s firm generated an operating margin last year (Ebit on revenue) of 12.1 %, ahead of German premium manufacturers BMW and Mercedes. The US company generated $ 5.5 billion in net profit in 2021 and sold 936,000 cars. The ranking of producers by profitability is, to say the least, different from the Top 10 by volume.

Scale effects

The car’s troublemaker – finally – benefits from its original “business model”, based on a strong integration, from the manufacture of the battery to the associated services. “Tesla is also heavily dependent on simplicity: a reduced range, few options,” comments Philippe Houchois, an analyst at Jefferies.

Under these conditions, any increase in volume now has a multiplier effect on profitability. The profit margin for the automotive industry increased further in the first quarter of this year to 19.2%. An absolute record in the industry if we exclude luxury car manufacturers like Ferrari.

With 12%, BMW and Mercedes regain their place at the top of the table, logical for more profitable “premium” carmakers. “Buyers with high purchasing power have not really suffered from the pandemic, which has favored the sale of more expensive cars,” the analyst recalls.

Stellantis’ performance, born in early 2021 from the merger between PSA and FCA, was more surprising. For a generalist, it is quite an achievement to generate a margin of 10.6% (not adjusted for exceptional goods) worthy of “premium” producers. The group benefited from the lack of chips, which allowed it to concentrate its sales on the most profitable cars. But he also saw merger-related synergies and was shaken by his boss Carlos Tavares’ drastic cost-cutting methods.

Volkswagen, fairly average profitability

The traditionalist for generalists, Toyota, for its part, remained well positioned at 10.4%. The world number one in terms of the number of vehicles sold not only benefits from sharp management, which made it suffer less than its competitors during the shortage last year, but also from a particularly well-balanced geographical mix. “Toyota is the benchmark in the sector, especially for the stability of its performance over the years,” notes Philippe Houchois.

Faced with the first in the class, the dominant manufacturers in Europe did 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 Volkswagen Group’s profitability, which accounts for 40% of its sales on the old continent, remains fairly average at 7.7% compared to other major producers in the sector.

Finally, the three manufacturers of the Renault-Nissan-Mitsubishi Alliance are at the bottom of the rankings, and they have overcome the difficulties encountered in recent years. Already weakened by the race for quantities sought after by Carlos Ghosn, then by the crisis following the spectacular arrest of their ex-boss, all three were thrown into the red by 2020, hit hard by the health crisis. The operating margins generated last year (3% at Renault, 2% at Nissan) reflect not only the restructuring efforts made over the last two years, but also the general recovery for the whole sector. Whether this improvement will last is still unknown.

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