(Finance) – Car manufacturers could increase theirs market value and theirs profit margins if they decide to focus firmly on electrification. This is what a ‘financial analysis conducted on six car manufacturers – BMW, Mercedes, Stellantis, Toyota, Volkswagen and Toyota – commissioned by the environmental NGO Transport & Environment to the research company Profundo which looked at the financials of the six manufacturers and separated the electric vehicle and combustion engine businesses of each into two separate companies. In particular, car manufacturers would increase by 800 billion euros their equity value if they accelerated the transition to battery-powered cars this decade instead of clinging to their combustion engine business model.
Results contrary to those highlighted by most of the sector analyzes which have often reported the risk of a decline in profitability in the short term and a contraction of jobs with a too sudden switch to the electric car. According to the forecasts of the analysis, on the other hand, operating profit margins for electric vehicle companies will exceed those of combustion engine manufacturers in 3-5 years and towards the end of 2020 the profit margins of internal combustion engine manufacturers they should decrease if not become negative.
“Going for a slow phasing out of combustion engines is financial suicide for automakers. The slow transition destroys shareholder value and jeopardizes the demise of entire companies. The only transition that makes business sense is fast and furious, “he said Luca Bonaccorsi, director of sustainable finance at Transport & Environment (T&E). Based on the model developed by Profundo, the assessment of the six car manufacturers analyzed could grow an average of 316% compared to today by switching to electric between 2025 and 2030 faster than their current plans.
A slower-than-expected transition to electric vehicles in the second half of the decade would lead to lower growth in market value and could even reduce the valuation of Toyota, one of the slowest automakers to electrify so far, compared to today. For Volkswagen instead a rapid transition could grow the market value by more than three times (253%), however Stellantis nearly five times (388%). Toyota, which has been slow to electrify, has lower growth potential (70%). As for the premium market, the opportunities are even greater: Mercedes-Benz could increase its value by 471% in 10 years, BMW 472%. Also Volvo Cars it would increase its market value by 245% if it were to accelerate its already fast transition to the rechargeable car.
“A faster transition to electric is not only in the interests of the climate and consumers, it is vital for the financial viability of European carmakers – he stressed. Julia Poliscanova, T&E senior director for vehicles and e-mobility – EU lawmakers have an obligation to these businesses and workers to support a timely transition. CO2 standards for cars higher than those currently on the table for 2025 and 2030 are key to accelerating it ”.