According to a study by the auditing and consulting firm EY, the operating profit (EBIT) of the world’s 19 largest automakers almost halved – a 49.2 per cent drop. From January to June, revenue was €42.8 billion (compared to €84.3 billion in the same period last year). However, overall sales stagnated. In light of slumping profits, the established Western auto industry is in a deep and structural crisis, as EY auto expert Constantin Gall comments. Electric cars are selling significantly weaker than expected, and cutthroat price competition is prevalent in key sales markets.
“The problems in China are being exacerbated by the fact that Asians are increasingly turning to national car brands,” Gall continues. High transformation and restructuring costs, recalls, and supply chain disruptions are also causing problems. The global auto industry’s weak phase will therefore continue for the time being.
Car companies should rid themselves of their legacy burdens
That, at least, is what Gall predicted with a view to the future. The storm whipping up the headwinds will not subside anytime soon. The expert justified this assessment, among other things, with the continued weak economy. The geopolitical situation and tariff policy are also unlikely to develop positively in the foreseeable future. “For many manufacturers, the entire business model is at stake. For some manufacturers, this will pose a threat to their very existence in the medium term,” the EY expert fears. This makes it all the more important that car companies make tough decisions. According to Gall, the good old days are not coming back!
The industry has fundamentally changed. And the automotive industry must try to adapt economically to this. Car companies must rid themselves of legacy burdens, Gall warns. The far too large portfolio should be reduced so that they can focus on the essentials – on clearly defined customer segments and a clearly defined, yet competitive, model range. Because, according to Gall, size isn’t everything. As we see today, size can also become a hindrance when it comes to adapting to new circumstances.
