25 July 2014

Brand Profits In Europe

This sort of car is getting sales up, but unit profit is down

I don't understand why car makers discount at the expense of profit. I know factories running below capacity is an issue, but in the end, discounting benefits no one. It is so much better to get costs down, especially with cost savings through co-operation with other car makers. So what are some car makers saying about their European profitability?

Volkswagen: It's profit is just below 3%, well short of Toyota's near 9%. It is wanting to get costs down. VW has been increasing it's market share in Europe in recent years and selling well in China. So why is it's European share so high, yet it now bemoans the lack of unit profit? Too many cars made in high wage Germany. Chasing sales at the expense of margins, or put another way, trying too hard to catch Toyota in unit sales. The cracks are showing.

Toyota: It is profitable in Europe and plans to avoid discounting to improve it's share. Internationally, Toyota is a very profitable car maker.

Ford: It has just announced it's first quarterly profit in three years. It is so low, let's call it break even. Still, that is a big move in the right direction. Ford's European market share has dropped a bit in that time, yet it has moved out of losses. Favourable currency movement has helped too.

GM: It's losses are up as Euro market share has improved. GM say one off costs associated with becoming more profitable are to blame for the increase in the wrong direction. GM remains bullish about getting back into the black in 2015 or 2016.

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