The latest Automotive News Europe / PricewaterhouseCoopers Transaction Services Shareholder Values (TDSI) shows that Europe’s car industry continued to suffer setbacks in overall shareholder value in the second half of 2021. The overall value of auto manufacturers dropped 12.8% year-over-year, while car dealers fell 10.9% and component suppliers were the first to suffer, down 22.2% year-over-year. But, as expected, these trends reversed in Q3, with car companies and dealers posting solid increases in market share. The European auto makers, led by BMW, Mercedes, VW, Audi, BMW and Seat, posted their highest quarterly profits since the global economic crisis began in Q4 of 2021. As a result, equity markets in Europe remained broadly positive, even as signs of weakness in the U.S. housing market and oil prices around the world threatened to weaken the currencies of oil exporters.
The latest Automotive News European/Asian Pacific Business Review shows that the auto manufacturers in Europe, Japan, South Korea, Australia, and China continue to expand aggressively into the Asia-Pacific region. In particular, manufacturers in these regions are taking advantage of weakening export prices for their vehicles in order to gain a wider customer base in Asia. For example, Toyota is setting up a new manufacturing facility in China. Nissan plans to open another facility in the Chinese city of Chengdu.
Despite these successes, a number of factors detract from Europe’s overall performance. First, the automobile sector in Europe continues to contract, with manufacturers cutting production and labor costs to reduce operating costs. Second, gross and net debt levels continue to rise. Third, the European auto sector continues to rely heavily on exports of products that have high value-added qualities, such as sophisticated safety features and hybrid vehicles. Finally, gross and net employment in Europe is stagnant or falling, adding further strain to household budgets.
On the positive side, the European auto manufacturers earned a median profit of EUR 7 billion in the third fiscal year (ending June 2021). During this period, six of the ten manufacturers profited, earning over EUR 5 billion. This level of profitability is at or above the median of industry performance throughout the last ten years.
In terms of Europe’s overall economic health, the third quarter of the year registered the lowest level of growth since the global recession began. gross domestic product (GDP) growth was 2.3 percent, slightly better than forecasts of growth of EUR 1.5 percent. Consumer price inflation also picked up slightly, rising by only three bps to reach the highest reading since the global crisis began. The recent slowdown in global markets resulted in an increase in job losses in euro zone automobile manufacturing, particularly in the BMW group. In addition, Europe’s industrial production picked up from the first half of the year, driven primarily by increases in China and Japan.
The fourth quarter saw the release of the first set of European factory figures for the period of 2021, which showed a marked slowdown in new vehicle production, particularly in Germany and the Netherlands. The index of manufacturing activity for the period was revised downward, with a gain in Portugal and a reduction in Spain. Despite these revisions, the index still reported a gain in manufacturing and economic growth across the euro area. The European automaker slipped just one spot to sixth among the largest manufacturers of passenger cars in the world, behind Toyota, Renault, BMW, Honda and Nissan.