Ferrari and Tesla, the world’s most profitable carmakers

My annual financial results analysis for the majority of Western OEMs and some big Chinese showed interesting results for the fiscal year between January and December 2022. This analysis includes the information for 25 different companies around the world: 8 from Japan (Isuzu, Subaru, Honda, Toyota, Mitsubishi, Mazda, Nissan, and Suzuki); 7 from Europe (Ferrari, Mercedes-Benz, BMW, Stellantis, Volkswagen, Renault, and Aston Martin); 5 from China (BYD, Great Wall, Geely, Xpeng, and NIO); 3 from USA (Tesla, General Motors, Ford); and one from Korea (Hyundai-Kia) and India (Tata, that includes JLR).

Europe ahead

The first interesting finding from this analysis is that the seven European OEMs in scope led the profitability ranking compared to their peers from other regions. In 2022, the European car makers made almost €79 billion in operating profits, out of a total revenue of more than €804 billion in revenue. This means that their combined operating margin was 9.8%. The result was the best among all the regions, and even 0.5 points higher than the results in 2021.

Part of the positive result is explained by the ability of these companies to turn a problem into an opportunity. The main issue that all the world’s car makers had to deal with in 2022 was the supply chain crisis. Production was not possible at high rates because there were no parts/semiconductors available. Consumers around the world were forced to wait for months to get their new vehicle.

Although this situation had a negative impact on sales, it was the best opportunity to the OEMs to reduce inventories, increase production efficiency and consequently, improve their profitability. Both, OEMs and consumers learned to live under the new reality, and while it is still a pain for the latter, the former just got used to it and made use of it.

Ferrari is unbeatable

The other big conclusion from the financial analysis is that Ferrari is still the absolute king of profits. Although the operating margin fell by one percentage point between 2021 and 2022, the Italian super car maker is unbeatable, even compared to Tesla, the second in the ranking.

Last year, Ferrari delivered 13,221 new cars around the world, contributing to a total revenue of €5.09 billion. From this total, the company earned €1.22 billion after paying the operating expenses. In other words, Ferrari made 24 cents from every 1 euro in sales. This is a lot of money compared to the industry’s average of 7.6 cents. And the best is yet to come, as the Purosangue SUV is yet to arrive.

Tesla was the second most profitable and the second to post the highest operating margin gain between 2021 and 2022. Tesla’s margin jumped from 12.1% in 2021 to 16.8% last year. Musk’s company is one of the rare cases of profitability within the EV segment. More cars sold, no new cars development (the Model Y is the latest and was introduced in 2019), and more economy of scale explained the profitability increase.

And China?

It is hard to have a full picture of the Chinese industry as many of its big companies also produce cars for the Western brands through Joint Ventures. Still, from the very few where there is stand-alone information, the situation is quite mixed. Great Wall posted the highest profitability with 6.8%, followed by BYD and Geely. In contrast, Xpeng and NIO, the two EV startups saw big loses in 2022.

As they continue to gain traction not only in China (where the Chinese brands made up 52% of the new light vehicles last year), but overseas, we should start to see better results in the coming years. So far, they have been able to flourish thanks to the strong support from the government, steady local demand. Now many of these car groups are ready to enter their second phase of their evolution, which is making money and expand globally.

Profitability to decrease in 2023

The positive response from the industry to the several challenges in 2022 is definitely a good sign that it is flexible and easily adapts to new situations. The car makers that had the best financial performance were those who focused their resources on the most profitable products. This is why the waiting lists for a brand new car were different according to the model.

However, this is likely to change for bad in 2023. The inflationary pressures in the economies, the rising geopolitical tensions, and the recent price war started by Tesla is only going to complicate things to the carmakers. It is unlikely to see these levels of profitability by the end of this year under these circumstances.

Source: Financial Statements of the OEMs.

Note: the fiscal year used in this analysis is January-December. The financial results from the companies using different fiscal years (Japan and India) were adapted.