The key role of BBA financial data improvement is to focus on internally optimized management.
Text | Qian Boyan
With the official release of the annual report of audi group on March 17, local time, the top three BBAs (Mercedes-Benz, BMW, audi) of German luxury cars have handed over their 2021 report cards.
Although the three answer sheets are slightly different, their commonalities are obvious: these are three answer sheets with high scores, and the disadvantage is that the examination questions are still a copy of the last Chinese imperial examination in 1905 and the question of the eight shares and the policy questions - whether the BBA can pass the test of the "higher civil service examination" in the new era is still unknown.
Ruthless money-making machine
For investors who believe in value investing and pay attention to dividends, holding shares in Mercedes-Benz Group (hereinafter referred to as Mercedes-Benz), BMW and Audi (Volkswagen) is undoubtedly a good deal, after all, the BBA big three have once again proved their stable gold absorption ability for decades under the double blow of the new crown epidemic and the chip crisis in 2021.
Among them, Mercedes-Benz, which completed the division of its truck business last year, had a full-year turnover of 168 billion euros, an increase of 9% year-on-year, of which the continuous operating business (that is, the business that remained within the group after the split) accounted for 133.9 billion euros; the pretax profit was 29.1 billion euros, an increase of 340% year-on-year, of which the continuous operating business accounted for 16 billion euros; the net profit increased significantly from 4 billion euros in 2020 to 23.4 billion euros, and the continuous operation business accounted for 11.1 billion euros.
The old rival BMW Group also performed well, recording total revenue of 111.239 billion euros in 2021, an increase of 12.4% year-on-year; pre-tax profit reached a record high of 16.06 billion euros, an increase of 207.5% year-on-year; and net profit reached 12.463 billion euros, an increase of 223.1% year-on-year.
The Audi Group, an hour's drive from Munich, recorded total revenue of 53.068 billion euros in 2021, up 6.2% year-on-year; net profit of 5,498 million euros, an all-time high of 114% year-on-year; and profit margins increased from 5.1% in 2020 to 10.4%.
Even Audi's parent company, the Volkswagen Group, was able to achieve a 12.3% year-on-year increase in sales revenue of 250.2 billion euros, pre-tax profit increased by 72.5% year-on-year to 20.1 billion euros, and profit after tax increased by 74.8% year-on-year to 15.4 billion euros.
Unfortunately, however, the major players that play a key role in the improvement of BBA's financial data are not the technical factors that the Germans have repeatedly emphasized, such as electrification or digitalization, but the management factors that focus on internal optimization.
Especially if it is specific to the sales data of BBA, it is not as dazzling as its financial data. Mercedes-Benz's total sales of passenger cars and light commercial vehicles for the whole year last year were about 2.3302 million units, down 5% year-on-year; Audi delivered 1.689 million vehicles worldwide, down 0.7% year-on-year; the only exception was BMW, which delivered 2.52 million vehicles worldwide, up 8.4% year-on-year.
Mercedes-Benz said that thanks to product mix and cost efficiency, the Mercedes-Benz passenger car business segment reduced fixed costs by 16%, while bicycle turnover increased by 26%; BMW also attributed the improvement in financial data to more reasonable pricing and a sound product array; Audi also said that the positive impact of continuous cost optimization, raw material hedging and positive effects of currency exchange rates pushed up profits.
Just like Audi's corporate slogan Vorsprung durch Technik, although translated as "breakthrough technology to enlighten the future", its original German meaning is to establish a leading position through technology, and now the term technology seems to have yet to be proved by the BBA.
A successful transformation?
Taking Mercedes-Benz, the largest in the BBA, as an example, the Swedish CEO Kang Linsong, who took office for two years, overthrew the sales-oriented route of his predecessor Zetsche, and instead set the streamlining of the model mix and improving profit margins as the new direction of the group: in short, Mercedes-Benz needed more S-class and SUVs, rather than the chicken-rib compact models, typical of which is the Mercedes-Benz B-Class that has been abandoned.
Specific to the sales of each model, although Mercedes-Benz's total global sales fell by 5% year-on-year last year, its fist model S-Class sold 87,000 units, a year-on-year increase of nearly 40%. The 2-ton G-class sold 42,000 units last year, equivalent to all the G-class capacity before 2024. As for the ultra-luxury brand Maybach, which is in the same series as the S-class, it also achieved more than 50% year-on-year sales growth, reaching 15,730 units, of which 9,400 units were sold from the Chinese market.
This increase in luxury cars is also reflected in the BMW Group. BMW CEO Chiptzer concluded at the earnings report: "This (financial report) is the result of our adherence to the established strategy, that is, to provide the right product to the market at the right time."
Chiptzer's reference to the "right product" undoubtedly refers to BMW's basic policy of prioritizing the supply of luxury models in the event of the chip crisis. In BMW's product portfolio, the X5, X7 and BMW 4 Series in 2021 will be breakthroughs, while the annual sales of BMW 3 Series, 5 Series and X3 also exceeded 150,000 units for the first time.
In addition, in terms of cost savings, BMW is also bold. These include the layoffs of more than 1,800 full-time employees (up to 16,000 from 2018 onwards) and the reform of fixed-amount corporate annuities into an index pension fund, measures That Chiptzer said have reduced BMW's operating costs by hundreds of millions of euros.
The characteristics of taking the high-end route, and audi with its back to the public can not be an exception. Previously, Volkswagen's move to group Lamborghini and Ducati brands into Audi's umbrella, in addition to the lamborghinis themselves are difficult to ensure scale effects, there are also considerations to enhance the Audi brand.
Specific to Audi's major models, on the one hand, Audi has announced that it will abandon the A1 and Q2 two entry-level models, on the other hand, the biggest contributor to Audi's financial data is the Q5, Q3 and A6 three mid-to-high-end models, which sold 796,000 units last year, almost half of Audi's total sales.
New Exam Questions for the New Era: Electrification and Digitalization
Volkswagen Group CEO Herbert Diess has repeatedly said that the car in the new era is a smartphone on four wheels, and the new positioning of volkswagen group is also a technology company that is more in line with the "trend".
If you look at the BBA from this perspective, then the successful transformation of the top three German luxury cars has undoubtedly not touched the soul.
At his earnings conference on February 24, Mercedes-Benz's CEO highlighted "three strategic priorities: focusing on the luxury car business, scaling up the electric offensive, and accelerating the implementation of automotive software."
Compared with the relatively easy to achieve focus on luxury car business to improve the profit margin of bicycles, Mercedes-Benz's existing EQA, EQB, EQC, EQV and other EQ series pure electric models are difficult to say successful, of which EQC and EQB in the WLTP conditions of the endurance can not break through 500 km, EQV endurance is even only a pitiful 363 km, only the benchmark S-class real flagship model EQS (784 km endurance) is still a qualified level.
If you consider that Mercedes-Benz's slogan is "The Best or Nothing", then all other models in the EQ family except the EQS are obviously Nothing.
After the failure of EQC, the annual global sales of the EQ family in 2021 reached 48,936 vehicles, which is only half of the annual sales of the most established car-making new force, Weilai, which also includes the contribution of the least expensive EQS of more than 16,000 vehicles.
As for the more eye-catching intelligent field, even though Mercedes-Benz has repeatedly advertised that it is the first company in Germany to obtain the German government's L3 level automatic driving license, Mercedes-Benz claims to have the 11th generation of S-class ticket jumping a few years ago with L3-level technology is still vividly remembered, and audi's new A8 has robbed the first L3-level self-driving luxury car - but the new A8's L3-level automatic driving function also jumped tickets.
Compared with Mercedes-Benz's unsatisfactory electrification transformation, BMW's paper data is indeed more beautiful: the annual sales of pure electric vehicles, which increased by 133% year-on-year to 103,800 units, accounted for almost 5% of the total sales, and were basically the same as the annual sales of new car-making forces. However, BMW's i series, like Mercedes-Benz's EQ series, has some of the problems of outdated models and technical performance that is difficult to say perfect.
In the case of BMW's sales champion iX3, for example, its price of 67,300 euros in Europe seems to be difficult to match the car's 461 km range, not to mention another old model that has been sold for many years, the i3 with a range of only 300 km. New models that are truly slightly competitive, such as the 578-kilometer i4 and the 593-kilometer iX, were not officially delivered until the end of November last year.
According to BMW's current plan, the Munichers will launch more than a dozen pure electric models by 2025 and are expected to complete a cumulative delivery of 2 million units worldwide. While the plan sounds radical, these goals are actually very conservative compared to Mercedes-Benz's sales structure, which expects electric vehicles to be the absolute mainstay by 2030.
On the one hand, BMW expects to be able to match the sales of electric models with fuel models until 2030, on the other hand, BMW's electric platform "Neue Klasse" will not land until 2025, if it is nearly a decade late compared with Volkswagen's MEB platform. Especially considering that the i7 of the benchmark 7 Series is only expected to have a range of only 610 kilometers, and BMW is the only manufacturer in the BBA that refuses to clearly set a timetable for exiting the internal combustion engine, the outside world has never stopped questioning BMW's lack of determination to transform.
Compared to mercedes-benz and BMW, which turn around slowly and half a beat, Audi obviously has to do better – even if it is the credit of Volkswagen.
Just a glance at Audi's planning schedule is enough to show that Audi is indeed a "plan pass": Audi is the first car company in Germany to announce its withdrawal from the fuel vehicle schedule, launching more than 20 electric models by 2025, and has determined that after 2026 it will only sell electric models (except for specific markets) to the world, and abandon all internal combustion engine research and development after 2033: collectively known as the Vorsprung2030 strategy.
Although the Vorsprung 2030 strategy is indeed much more determined than BMW's statement that "the internal combustion engine will occupy a place in 2030", even Audi, which relies on the Volkswagen MEB platform, still has no real ace electric model.
Even though its 81,000-unit eviction sales are acceptable, Audi's e-tron family is still rooted in the MEB platform of civilian models (not considering the older J1 platform), whether it is the 407 km endurance of the ordinary e-tron or the 475 km range of the e-tron GT quattro, it is still difficult to compare with the Position of the Audi brand in the fuel car series. In particular, the e-tron Sportback, the sales champion of last year's Audi electric model, although it is more popular, its endurance is only 376 kilometers.
As for the PPE platform with high hopes, on the one hand, it will not land in the Chinese market until 2024, on the other hand, the PPE platform that has been planned for a long time will be merged with the MEB platform into the SSP platform due to its slow progress.
Even without taking electrification and digitalization into account, the BBA's strategy of focusing on the high end itself carries long-term risks. Taking the German market, the home of BBA, as an example, the sales price of BBA bicycles has now exceeded 40,000 euros, an increase of nearly 10,000 euros compared with a decade ago. There are two main reasons why consumers are willing to pay more: first, a large number of baby boomers in Europe and the United States are entering retirement age, which is equivalent to the generation at the height of their spending power; second, the younger generation is currently enjoying the benefits of ultra-low lending rates under the European Central Bank's low interest rate policy. And these two factors, obviously, will not last long.