Agency Report –
Western Carmakers face a crisis that EY expects to intensify this year and for some legacy manufacturers, their entire business model is at stake, said consultancy EY automotive expert Constantin Gall.
“If profits continue to erode, some may face questions about their survival. Competition in the industry is currently brutal,” he added.
A new EY analysis of first-quarter earnings from the world’s 20 largest automakers shows German and US carmakers losing ground in both revenue and profits, while Asian firms – especially in China – made sharp gains.
Five of the six most profitable carmakers came from Asia, the analysis found.
Gall warned that weak demand, high costs and a slow shift to electric vehicles are straining German carmakers. Adding to their woes is a decline in Chinese market share, where local brands are increasingly displacing Western names.
Tensions in the US market also weigh heavily. New 25% tariffs introduced in April by President Donald Trump could lead to losses in the billions on both sides of the Atlantic, Gall said.
This will further widen the gap with Chinese competitors, who are not exposed to the US market, he added.
Several carmakers and suppliers have already announced plans to slash costs, but Gall said cost-cutting alone won’t be enough. “Western automakers must completely reinvent themselves,” he said.
He added that Chinese firms have demonstrated that speed, flexibility and focused investment can be more effective than simply spending more money.
Germany’s Volkswagen did notch one symbolic win, narrowly beating Toyota in revenue to take the top global spot for the quarter. However, the Japanese firm remained ahead in sales volume and operating profit.
By Frank Johannsen
