10 multinational car companies reported in the first quarter of 2022: the general decline in sales did not affect the performance

Economic Observer reporter Zhou Ju

Entering May, major multinational car companies have successively released their financial reports for the first quarter of 2022. The Economic Observer reporter combed and counted the financial reports of 10 multinational listed car companies that have released first-quarter financial reports and found that due to the market and supply chain challenges caused by the epidemic and the international situation, 9 of the 10 multinational car companies have experienced a decline in sales, namely BMW, Mercedes-Benz, Volkswagen, General Motors, Ford, Hyundai, Volvo, Renault, Stellantis, and only Tesla, a new energy vehicle manufacturer, has achieved sales growth.

However, from the perspective of financial performance, 8 multinational car companies have achieved counter-trend growth in revenue or profit, of which five have double growth in revenue and profit, namely BMW, Mercedes-Benz, Hyundai, Volkswagen and Tesla. General Motors and Volvo achieved revenue growth, but no profit growth, and Stellantis achieved revenue growth. Ford saw both revenue and profit decline; Renault's revenue declined, and profits were not announced.

Why do most multinational car companies achieve financial performance improvement in the face of declining sales? This is a question worth exploring.

Volumes declined but financial performance exceeded expectations

Among the nine multinational listed car companies whose sales declined, two fell by more than 20%, namely Volkswagen and Volvo, whose sales fell by 21.9% and 20.1% respectively in the first quarter.

In the first quarter of 2022, the Volkswagen Group delivered a total of 1.9 million new vehicles, down 21.9% year-on-year. This is believed to be mainly due to factors such as the epidemic and the Russian-Ukrainian conflict. However, Volkswagen Group's revenue and profit increased. According to the data, the Volkswagen Group's operating income in the first quarter of this year was 62.7 billion yuan, an increase of 0.6% year-on-year, and the operating profit excluding special project expenses was 8.5 billion euros, an increase of 75.7% year-on-year.

Volkswagen Group said the main drivers of the first-quarter growth were improved sales mix, better pricing, ongoing cost control and flexibility provided by the group's global presence, while mitigating the impact of global semiconductor and wiring harness shortages by reallocating resources between key markets such as Europe, China and the Americas.

However, the performance of Volkswagen's brands has been uneven. Luxury brands have been the main driver of Volkswagen Group's profit growth, with the combined operating profits of Audi, Lamborghini and Bentley doubling to €3.5 billion, while Porsche's operating profits increased from €1.2 billion to €1.4 billion. However, The Volkswagen Volume brand, which includes the Volkswagen passenger car brand, Skoda, SEAT/CUPRA and Volkswagen Commercial Vehicle brands, generated revenue of 24.4 billion euros in the first quarter, down 11 percent year-on-year.

Another company that fell was Volvo Cars, which sold 148,000 units worldwide in the first quarter, down 20.1 percent year-over-year. But Volvo's revenue in the first quarter was SEK 74.3 billion, up 8 percent year-on-year. Volvo's information shows that part of the reason for its revenue increase is to mitigate the impact by adjusting prices in the case of rising raw material, energy and freight costs caused by the situation in Russia and Ukraine. "So far, price increase measures have been implemented, but they have not dampened consumer demand." Recently, the company's chief financial officer Bjorn Annwall said. But Volvo's profits still fell year-on-year.

GM's first-quarter global sales have not been disclosed, but its sales in both major markets in China and the United States fell by more than 20%. In terms of finance, GM's revenue increased without increasing profits, with revenue in the first quarter of 35.98 billion US dollars, an increase of 10.8% year-on-year; Net income attributable to shareholders was $2.94 billion, down 2.7 percent year-over-year.

Among the three major German luxury brands, BMW and Mercedes-Benz have announced their first-quarter financial reports, both of which have achieved double growth in revenue and profit in the case of declining sales. In the first quarter of this year, the BMW Group sold about 596,900 units, down 6.2% year-on-year. Mercedes-Benz sold 487,000 units in the first quarter, down 10% year-on-year.

On the financial side, bmw group revenue in the first quarter reached 31.142 billion euros, an increase of 16.3% year-on-year, and net profit was 10.185 billion euros, up 259.5% compared with the same period last year. Mercedes-Benz's total revenue for the first quarter was EUR 34.86 billion, up 6% year-on-year, and net profit was EUR 3.59 billion, up 3% year-on-year.

Hyundai Motor's sales volume declined, but unexpectedly achieved both revenue and profit growth. Hyundai motor sold 903,000 units worldwide in the first quarter, down 9.7% year-on-year. However, Hyundai Motor's total revenue in the first quarter reached 30.3 trillion won, an increase of 10.6% year-on-year, and net profit reached 1.78 trillion won, an increase of 16.8% year-on-year. Hyundai said that the double growth in revenue and net profit in the first quarter was mainly due to the weakness of the South Korean won offsetting the adverse impact of the decline in sales.

Among the multinational car companies that reported profits, Ford was the only one to lose money, with a loss of $3.1 billion. According to the data, Ford Motor sold 970,000 units in the first quarter of 2022, down 9% year-on-year. First-quarter revenue was $34.5 billion, down 4.7% year-over-year, and adjusted pretax profit was $2.3 billion, down 41% year-over-year. Ford's overall net loss in the quarter was $3.1 billion as the market value of the new car company, Rivian, shrank in the first quarter.

In addition, Renault sales in the first quarter fell 17.1% to 552,000 units, and first-quarter revenue of 9.7 billion euros, down 2.7% year-on-year; Stellantis sales fell 12% in the first quarter to 1.374 million units; and first-quarter revenue of 41.5 billion euros, up 12% year-on-year.

Tesla's most profitable car companies have increased investment in electrification

Among all the listed multinational car companies, Tesla became the biggest winner, and its sales and financial performance were very impressive in the first quarter of this year. In the first quarter of 2022, Tesla delivered about 310,000 new vehicles, an increase of 68% year-on-year. According to the financial report, Tesla's total revenue in the first quarter of this year was $18.756 billion, an increase of 81% year-on-year; net profit was $3.318 billion, a sharp increase of 658% year-on-year. Tesla said that the increase in its revenue was mainly due to the increase in car deliveries and the increase in the average price of bicycles.

Surprisingly, Tesla's GAAP (US Generally Accepted Accounting Standards) automotive gross margin in the first quarter reached 32.9%. Such a gross profit margin level not only far exceeds the luxury car companies such as BMW, Mercedes-Benz and Audi, but also reaches several times that of mainstream car companies. For comparison, Volkswagen's gross margin in the first quarter was 13.5% and Volvo's was 8.1%. Among domestic new car manufacturers, the highest gross profit margin in the fourth quarter of last year was ideal cars, but only 22.4%.

Under the guidance of Tesla's ultra-high gross profit margin and the global irreversible development trend of electrification, almost all multinational car companies have announced their strategies for the transformation to electrification, and the relevant development plans are becoming clearer and clearer.

Multinational listed car companies emphasize the performance of new energy vehicles in sales and financial reports. Volkswagen Group said that its pure electric vehicle deliveries accounted for 5.2% of the total deliveries in the first quarter, reaching 99,064 units, of which the Volkswagen brand delivered a total of 53,400 pure electric vehicles, an increase of 74% compared with the first quarter of last year. Volvo Cars' Recharge models accounted for 34% of total sales in the first quarter, of which pure electric models accounted for 8%, doubling from the previous two quarters.

"The strong business performance in the first quarter proves once again that we are taking the Aoteneng platform as the fulcrum of an orderly transformation and rapidly launching a wide range of electric vehicle products to lead the development of electric and autonomous vehicles." Recently, Mary Barra, chairman and CEO of General Motors, said in a letter to shareholders.

As the world's largest new energy vehicle market, China has become a key market for the electrification transformation of multinational car companies. BMW said its new energy sales in China in the first quarter tripled from the same period last year. Mercedes-Benz sold 21,900 pure electric vehicles in the first quarter, up 210% year-on-year; plug-in hybrid sales hit a new record for the same period at 45,900 units, an increase of 8%year-on-year; overall, Mercedes-electric models (pure electric vehicles + plug-in hybrids) now account for 15% of total sales.

With the introduction of electrification products of multinational car companies, electrification will be the focus of R&D investment. Volkswagen Group said it will continue to develop pure electric vehicles and increase the number of electric vehicle models to 25. Volkswagen has announced a $7.1 billion investment in North American electric vehicles.

According to BMW's plan, 15 pure electric vehicles will be launched by 2022; by the end of 2025, it plans to deliver 2 million pure electric vehicles worldwide. By 2030, the BMW Group plans to deliver a total of 10 million pure electric vehicles to customers.

General Motors, Hyundai Motor, Renault, Ford, etc. have spared no effort in the transformation of electrification. Including the three major Japanese car companies that have not yet released their first-quarter financial reports- Toyota, Honda and Nissan, they have recently been moving in electrification and have set clear new energy development goals.

However, the current international situation, which is still unstable, and the impact of the epidemic have brought uncertainty to the full-year performance of multinational car companies in 2022. Mercedes-Benz said there is still uncertainty about the current geopolitical and macroeconomic situation. It expects sales in the automotive segment to grow slightly in 2022, with luxury car sales expected to grow by more than 10% year-on-year; adjusted return on sales is expected to be between 11.5% and 13%.

Hyundai motor said it expects its revenue growth rate to reach 13%-14% and operating margin of 5.5%-6.5% in 2022. GM expects its full-year net profit to be between $9.6 billion and $11.2 billion and adjusted EBITDA to be between $13 billion and $15 billion. Stellantis expects adjusted operating margins to reach double digits and achieve positive cash flow in 2022. Ford expects the company to maintain adjusted EBIT in 2022 between $11.5 billion and $12.5 billion.