Shares of Tesla rose more than 700% during 2020. At the beginning of last year many thought it was crazy that it was worth like Peugeot, Renault and Ford together, but it is already the most valuable auto company in the world.
Many will say that the stock market is a market of expectations and of course that the Californian company is a specialist in that. But he earns money for the car sold (we’ll talk about his financial debts another day). And that is what a company is established for: to earn money.
This leads us to think about how much money manufacturers make for each car manufactured. Given the size and the units they sell (a few months ago we published the figures of the best-selling car brands in the world in 2020) one might think that they are very buoyant companies. But it is also true that launching a car on the market requires very high investments and that they do not always end up being profitable.
Data from the study by Dr. Ferdinand Dudenhöffer, a veteran automotive industry analyst, professor of business administration who has worked for numerous manufacturers and heads the Center for Automotive Research at the University of Duisburg-Essen in Germany. These are data from the year 2020, highly influenced by the pandemic. They are not offered from all world manufacturers (it focuses a lot on Germany), but they give a slight idea of where the market is heading, with cars increasingly complex and expensive to build.
BMW: The figures of the Bavarians in 2020 give food for thought. One could imagine that it is enough to sell premium cars … but it turns out that in 2020 they have lost 1,100 euros per car sold. These are figures that cannot be maintained for long, if we take into account that in 2020 it sold 2.34 million units.Mercedes: The change of direction in image and public could make us see those of Stuttgart as a more vital company. But in 2020 they lost 600 euros per car sold. With its 2.2 million units sold, we would not be surprised if they began to reduce their range. Volkswagen: Nor was 2020 conducive to the brand, because per registered unit they lost 415 euros. In these volume brands, it is true that it helps to sell more so that costs are diluted and a 15.1% decrease in sales did not help.Toyota: It returned to lead the ranking of the best-selling automotive group, despite the fact that its global registrations fell by 11%. The best for them, who continue to earn per car sold, some 533 euros per unit.Porsche: Integrated in the Volkswagen Group, it is one of those firms that helps to balance the accounts. For each unit you earn around 10,000 euros. Multiplied by its 272,000 registered cars, it gives a good peak.Tesla: Without being a luxury manufacturer and focused on electric cars in which industrial improvements and costs should still improve, it manages to win 3,000 euros profit per car. Process efficiency is the key… and so is the sale of carbon dioxide certificates to other car manufacturers (like FCA).
When is a car more profitable?
To reduce the cost of manufacture (for which there is no exact figure), it is generally more profitable to make larger cars or with higher production volume, which explains the desire of manufacturers to share platforms, parts, structures … Much of the benefit is provided by the extras. It is not cheap to make modifications to the line to create exclusive versions or add elements to a car … but that cost is easily passed on to the consumer.
The latter explains in part why it is so profitable to make very exclusive supercars. It is the case of Ferrari. In 2019, it sold more than 10,000 units for the first time. 10.131 specifically. What Seat sells in a good month in Spain. But the interesting thing is that it was with an operating margin of 23.2% in each of them, earning 86,369 for each one. By the way, in 2018 it had been even more.
Within the cost of a car we can talk about two categories of expenses:
Fixed costs: They include things like maintenance of facilities, finding suppliers, testing prototypes …Variable costs: include the cost of labor, raw materials …
These are some details of manufacturing costs.
Raw materials and auto parts: It is most of it. Various studies indicate that it represents up to 57% of the total price.Investigation and development: It is carried out before taking any car to production and accounts for around 16% of manufacturing costs.Direct charges for labor and advertising: The cost of the work and the advertising charges of the units are taken into account.Taxes: Must include sales tax in cost. It ends up determining the price of the car on the market.Other factors: some of the other factors that add to production costs are depreciation, logistics, overhead …