Car manufacturers are making significantly less profit
Mercedes had to take a hit in the first half of the year, along with Volkswagen and BMW. High costs and weak demand in China are causing problems for the German manufacturers. Meanwhile, Japanese competitor Toyota is faring better.
Higher expenses and fewer sales in China have put pressure on German automakers in the first half of this year: The profits of both Volkswagen and BMW have dropped significantly compared to the same period last year, as the two companies reported. Mercedes had already reported a significant drop in profits last week.
BMW's profit in the first half of this year was 14.6% lower than in the first six months of 2023. Last year, the company reported a surplus of 6.6 billion euros, but this year it was 5.7 billion. Revenue also shrank slightly by 0.7% in the same period. The profit margin fell from 10.6% to 8.6%. High competition, particularly in China, where there has been persistent buyer hesitation, along with higher material and fixed costs, and increased research and development expenses, affected the results, BMW explained. In China, 4.3% fewer cars were delivered in the first half of this year compared to the same period last year. Overall, deliveries remained stagnant at around 1.2 million cars sold.
"Not enough for our ambitions"
Europe's largest automaker, Volkswagen, also earned significantly less from January to June compared to the same period last year. The group's after-tax result was 7.3 billion euros, a 13.9% decrease. Revenue increased slightly by 1.6% in the same period, but the profit margin fell from 7.3% to 6.3% - "not enough for our ambitions," said CFO Arno Antlitz.
Volkswagen CEO Oliver Blume described the result of Europe's largest automaker as "solid." The company attributed the decline in operating profit to unplanned provisions for a severance program and increased fixed costs. The vehicle sales decreased slightly compared to the previous year, from 4.4 million vehicles to 4.3 million cars.
The world's largest automaker, Toyota, also published its quarterly results. Thanks to the currently weak Japanese yen, Toyota reported a profit of 1.3 trillion yen (8.1 billion euros) from April to June, an increase of 1.7% compared to the same period last year. The weak yen and cost savings could have offset decreased sales and a decline in production in the domestic market.
Despite facing similar challenges with high costs and weak demand in China, German car manufacturer Mercedes also experienced a significant drop in profits during the same period.
Compared to its German counterparts, the German car manufacturer BMW was affected less by these issues, but its profit still decreased by 14.6% in the first half of the year.
