European OEM strategy: cost reduction and expansion beyond the EU

2012 results and future plans of several OEMs are reviewed

2013/04/09

Summary

Global Sales of 6 European OEMs

 Six European OEMs of PSA, Renault, Fiat, VW, BMW and Daimler sold 23.04 million units in 2012, up 3.4% y/y. Although the German three of VW, BMW and Daimler renewed their global sales records to result in good financial results, their sales in the European market remained in the same level as a year earlier. Increased sales outside the EU contributed to breaking the records.


 Renault dropped global sales by 6.4% y/y to 2.55 million units, the first year-on-year drop after four years. Fiat expanded global sales by 6.1% to 4.2 million units, since favorable sales of its affiliated Chrysler Group in North America balanced out doldrums in Europe. PSA has the largest dependency on the European market among the six OEMs with European sales accounting for 62.3% of total sales volume. Its global sales, therefore, were largely hit by the sluggish vehicle sales in Europe and severely diminished by 16.5% y/y to 2.96 million units.

 The German three also refreshed their records in revenue and net profit. Fiat alone decreased profit, while the Fiat Group greatly increased revenue and net profit as a result of the merger with Chrysler. PSA posted operating loss and net loss.

 For 2013, each European OEM forecasts sluggish European sales and market expansion outside the EU including the U.S. and China. They plan to develop and strengthen sales and production operations and to pursue cost reduction in non-EU markets including North America as well as in the emerging markets including China.


Related reports:
Mercedes-Benz plans to sell 1.6 million units in 2015 (Feb. 2013)
BMW to reach sales of two million vehicles: four years ahead of plan (Dec. 2012)
VW: to increase sales in China and US, eyeing 2018 global target of 10 mil units (Aug. 2012)

Six European OEMs' plans for 2013

PSA  PSA forecasts that the European market will contract 3 to 5 %, while it expects 8% growth of the Chinese market and 2% growth in both Russia and Latin America. In 2013, it aims to halve the negative 1,387 million Euros free cash flow of 2012.
Renault  Renault expects that the worldwide market will expand 4% thanks to buoyant markets of North America and the BRICS, while it anticipates the European market will shrink by 3 to 4%. In 2013 the OEM aims to increase unit sales, improve operating profit and to maintain positive free cash flow, on the condition that the European and the French markets are not worse than expected.
Fiat/Chrysler  The Fiat-Chrysler Group predicts that the European market will contract up to 5% and the U.S. and Brazilian markets will expand approximately 5%. It aims for 88 billion to 92 billion Euros in revenue, 4 to 4.5 billion Euros in operating profit and 1.2 to 1.5 billion Euros in net profit. The Group said that declines in Europe would be covered by growth in North and Latin Americas and the Asia Pacific region.
VW  VW expects the passenger car demand in Western Europe will generally be facing difficulties in 2013, while growth in China and India to increase but in a smaller level than before. Based on the assumption that the situation should turn around in 2014, VW forecasts that growth will continue especially in Chinese and ASEAN markets and expects sales in 2013 to be equivalent to those in 2012.
BMW  BMW expects 4% growth of the global market: 2.1% of the U.S., 8.5% of China, 10% of Russia, 7% of India and 9% in Brazil. As for Europe, it predicts contraction of 1.8%. Although the OEM forecasts that it will consecutively renew its record sales in 2013, it expects the EBIT unchanged from 2012 since it will make large investment in R&D and facilities.
Daimler  Daimler expects that the worldwide market will expand by 2 to 4%. It anticipates steady growth of demand in China and the U.S., although it predicts that profits in the first half of 2013 will not reach to the same level of result as the same period last year. Daimler expects that profits should rise in the second half as a competitive model is to be launched. As for EBIT, it expects a slight year-on-year drop in the passenger car business but anticipates growth in the commercial vehicle business. From 2014 Daimler aims to increase EBIT in both passenger car and commercial vehicle businesses.

Six European OEMs' business results

(Euros in millions and global sales units in thousands)
2007 2008 2009 2010 2011 2012 Changes
in
2011-2012
PSA Global Sales Volume 3,428 3,260 3,188 3,602 3,549 2,965 (16.5%)
Sales 58,676 54,356 48,417 56,061 59,912 55,446 (7.5%)
Operating Profit 1,752 550 (689) 1,796 1,315 (576) -
Net Profit 885 (363) (1,161) 1,134 588 (5,010) -
Renault Global Sales Volume 2,485 2,382 2,309 2,627 2,723 2,550 (6.4%)
Sales 40,682 37,791 33,712 38,971 42,628 41,270 (3.2%)
Operating Profit 1,354 326 (396) 1,099 1,091 729 (33.2%)
Net Profit 2,734 599 (3,068) 3,490 2,139 1,735 (18.9%)
Fiat/Chrysler Global Sales Volume 2,234 2,153 2,152 2,082 3,966 4,209 6.1%
Sales - - 32,684 35,880 59,559 83,957 41.0%
Operating Profit - - 736 1,112 2,392 3,814 59.4%
Net Profit - - (345) 222 1,651 1,411 (14.5%)
VW Global Sales Volume 6,190 6,257 6,336 7,203 8,265 9,276 12.2%
Sales 108,897 113,808 105,187 126,875 159,337 192,676 20.9%
Operating Profit 6,151 6,333 1,855 7,141 11,271 11,510 2.1%
Net Profit 4,122 4,688 911 7,226 15,799 21,884 38.5%
BMW Global Sales Volume 1,501 1,436 1,286 1,461 1,669 1,845 10.5%
Sales 56,018 53,197 50,681 60,477 68,821 76,848 11.7%
Operating Profit 4,212 921 289 5,111 8,018 8,300 3.5%
Net Profit 3,134 330 210 3,224 4,907 5,122 4.4%
Daimler Global Sales Volume 2,089 2,073 1,551 1,895 2,111 2,198 4.1%
Sales 99,399 98,469 78,924 97,761 106,540 114,297 7.3%
Operating Profit 8,710 2,730 (1,513) 7,274 8,755 8,615 (1.6%)
Net Profit 3,985 1,414 (2,644) 4,674 6,029 6,495 7.7%
Total Global Sales Volume 17,926 17,561 16,822 18,871 22,283 23,043 3.4%
Sales - - 349,605 416,025 496,797 564,494 13.6%
Operating Profit - - 282 23,533 32,842 32,392 (1.4%)
Net Profit - - (6,097) 19,970 31,113 31,637 1.7%

Sources: The OEMs' financial statements