The year 2024 promises to be particularly difficult for the automobile industry. In the first half of the year, several major manufacturers recorded significant declines in revenue, sending shock waves throughout the sector. With a general decline in sales, particularly in Europe, the automotive giants are facing an unprecedented crisis for several years.
Why such a fall?
Several external factors are involved. First, the global economic crisis, marked by persistent inflation, has reduced the purchasing power of consumers. This phenomenon resulted in a drop in purchases of new vehicles, with customers favoring used vehicles or delaying their purchase. The shortage of certain components, in particular semiconductors, continues to disrupt production, forcing some manufacturers to slow down or temporarily suspend certain assembly lines.
Rising production costs are also a major obstacle. With the increase in the prices of raw materials and energy, the margins of automobile manufacturers are shrinking. These additional costs are not always reflected in the final price of the vehicles, which directly affects the profitability of companies.
The transition to electric: an opportunity or a pressure for the industry?
If the adoption of electric vehicles is seen as a response to environmental issues, it also represents a major challenge for manufacturers. The transition to electricity requires massive investments in research and development, not to mention the adaptation of production infrastructures. These costs, added to those already existing, weigh heavily on the financial balance sheets of companies in the sector.
Sales of electric vehicles are certainly increasing, but they do not yet compensate for the decline in sales of traditional combustion vehicles. Many consumers remain reluctant to go electric, particularly due to the higher cost of these vehicles, still insufficient charging infrastructure, or concerns related to range.
This pressure for a rapid transition to electric vehicles therefore has a double effect: it forces the industry to invest, while reducing short-term profitability. This could even dampen the enthusiasm of certain manufacturers in the face of the difficulties they encounter in maintaining their profitability during this transition phase.
The large companies most affected by this drop in revenue
The drop in revenues in the automotive industry has not affected all manufacturers equally. If some, like Volkswagen And BMW, have managed to limit the damage thanks to diversification strategies, other giants have seen their figures plunge drastically.
Volkswagen, for example, has managed to maintain its sales of electric vehicles thanks to its popular models like the ID.4, but sales of its gasoline and diesel cars have seen a significant drop. The German group still saw its revenues decline, partly due to high production costs linked to the electric transition.
On the other hand, BMW suffered from falling sales of its luxury thermal models, despite strong demand for its electric vehicles. The manufacturer had to face rising raw material prices, which reduced its margins, particularly on its high-end vehicles.
Newer companies, such as Tesla, are also affected, although to a lesser extent. The American company, which relies exclusively on electric vehicle sales, has also felt the impact of the global economic crisis, although its more agile business model allows it to better adapt to fluctuating demand. However, it remains less exposed to the same risks as traditional manufacturers, thanks to its upstream investments in electrical technologies.
How car manufacturers are adapting to this new situation
Faced with this drop in revenue, car manufacturers have no choice but to adapt quickly. Several of them have implemented cost reduction strategies, ranging from reducing production to optimizing their supply chains. Some have also chosen to freeze certain investments to concentrate their resources on the most promising projects, particularly in the field of electric and autonomous vehicles.
One of the major levers of this adaptation is thetechnological innovation. By investing in electrification, manufacturers hope to capture a growing market, although this strategy will take time to bear fruit. Additionally, government subsidies and policies play a key role in the survival of some businesses. In Europe, subsidies for electric vehicles and energy transition aid programs are allowing the industry to stay afloat despite falling sales.
Manufacturers are also turning to emerging markets to compensate for the drop in demand in more mature regions. Asia and South America are thus becoming preferred targets for large groups, who see short-term growth potential there.