My analysis of annual financial results for most Western automakers and some large Chinese automakers showed attractive results for the fiscal year between January and December 2022.
The analysis includes information relating to 25 different companies from all over the world. That 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 lastly Tata from India, which includes Jaguar Land Rover.
Europe In The Lead
The first interesting fact that emerges from this analysis is that the European manufacturers lead the profitability ranking compared to the rest of the world. In 2022, European automakers made nearly €79 billion ($87.3 billion) in operating profits, out of a total revenue of more than €804b ($888.5b).
That means their combined operating margin was 9.8 percent. The result was the best among all geographical areas and even 0.5 points higher than 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 automakers in 2022 was the supply chain crisis. It was not possible to maintain high production rates because there were no parts/semiconductors available. Consumers around the world have been forced to wait for months to get a new vehicle.
Although this situation had a negative impact on sales, it was the best opportunity for the manufacturers to reduce inventories, increase production efficiency and, consequently, improve profitability. Both manufacturers and consumers have learned to live with this new reality and, while it is still a pain for the latter, the former have gotten used to it and treasured it.
Ferrari Is Unbeatable
The other big conclusion from the financial analysis is that Ferrari is still the absolute king of profits. Although the operating margin fell by one percentage point between 2021 and 2022, the Italian automaker is unbeatable, even compared to second-placed Tesla.
Last year, Ferrari delivered 13,221 new cars worldwide, contributing to a total turnover of €5.09b ($5.6b). From this total, the company earned €1.22 b ($1.35b) after paying operating expenses. In other words, Ferrari earned 24 cents for every euro of sales. This is a huge amount compared to the industry average, which is 7.6 cents. And the best is yet to come, given that the Purosangue has yet to work its SUV magic in terms of income.
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 percent in 2021 to 16.8 percent last year. Musk's company is one of the rare cases of profitability in the electric vehicle segment. There are multiple reasons for this: more cars sold, a lack of new car development (the Model Y is the newest and was introduced in 2019), and greater economies of scale.
It is difficult to get a complete picture of the Chinese industry, as many of its large companies also produce cars for Western brands through joint ventures. However, from the limited information available, the situation is rather heterogeneous. Great Wall had the highest profitability at 6.8 percent, followed by BYD and Geely. In contrast, Xpeng and NIO, the two EV startups, posted steep losses in 2022.
The author of the article, Felipe Munoz, is an Automotive Industry Specialist at JATO Dynamics.