Latest financial results from major automakers reveal a mixed bag — but pressure on margins.

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In 2024, industry-wide pressures include two key trends: First, sluggish consumer acceptance to new battery electric vehicles (BEVs), and second, vehicle affordability concerns pushing against natural demand and increased inventory.

With the latest round of earnings reports, most automakers are seeing pressure on operating margins. At the top line, a difficult market in mainland China and the uneven transition to BEVs would seem to be the obvious cause. However, across the board, automakers are facing drags on profitability that are both common to the industry and company specific.

Let's take a look at changes in vehicle sales, revenue, operating income or gross profit and operating income or gross profit margins.

Volkswagen and Ford see improved revenue but lower margin

Volkswagen's revenue improved despite declining sales — but non-operating factors had an impact on operating results. VW says that adjusting for those factors, operating margin improved from first quarter to second quarter.

Within VW Group results, Audi saw a decline in operating margin, as sales fell on supply constraints. Porsche's operating revenue and margin fell on costs for model ramp-up. Both Audi and Porsche are introducing new products which affect costs today but leave them better positioned for the future.

VW Group Core brands also saw operating margin fall, though the company noted restructuring efforts as the cause rather than market conditions. For VW Group, there seems to be less turmoil on the balance sheet related to the BEV transition or the difficult market in mainland China.

While Ford saw increased sales and revenue in the first half of the year, its operating income took a significant hit. Ford is struggling to see the level of traction it wanted for the Ford F-150 Lighting and Mustang Mach-E BEV products, and in 2024, Ford's story is about the "freedom of choice" the company can offer in propulsion solutions.

The company is expecting to see a US $5 billion loss from its Model e electric vehicle division in 2024. However, the main reason for the division's decline in first-half 2024 performance was unexpectedly high warranty costs in the second quarter, along with higher costs for new-product materials and manufacturing.

Ford no longer reports financial results geographically but says that it is profitable in mainland China and all of its international regions.

BMW and Mercedes-Benz see sales, revenue, and margin fall

BMW and Mercedes-Benz both reflected lower sales and revenue, with Mercedes-Benz seeing larger declines in all four metrics. These companies noted industry conditions in mainland China adversely impacting performance. Both brands are heavily electrifying, with BMW carrying a bit more breadth in its BEV offerings at this point. The BMW purpose-built BEV Neue Klasse architecture arrives in 2025, causing increased engineering and development spend in 2024.

BMW leadership professed itself satisfied with the performance of its core automotive unit in the first half of 2024, though BMW has experienced a harshening of the global operating environment. Though BMW has vowed not to engage in the price war in mainland China, the automaker also noted weaker consumer sentiment in China and heightened competition as drags on performance.

Although BMW declined in all four metrics, the declines were less severe than many others. For Mercedes-Benz, the comparatively more difficult quarter has led leadership to revise its profitability target for 2024, though the Mercedes-Benz Cars division is still ahead of its margin goal of 10%.

Mercedes-Benz Mobility division is being affected by ramp-up costs for the Mercedes-Benz charging network as well as the challenging market in mainland China.

General Motors and Toyota report sales declines, but improved revenue and margin

General Motors sales declined in the first half of 2024, but strong pricing improved revenue and cost discipline. The launch of less-complex new-generation ICE vehicles contributed to a whopping 41.8% improvement in operating income and a 2.1-point increase in operating margin.

GM increased its full-year 2024 guidance, though the company also noted another delay in completing the conversion of a vehicle assembly plant to build full-size BEV trucks to mid-2026. GM is also still struggling in mainland China; during the earnings call, CEO Mary Barra said GM is working with its JV partner to restructure the business for sustainable profitability.

Toyota reported an overall decline in first quarter sales, increased revenue, increased operating income and improved margin. Toyota improved its profit despite an ongoing issue in the Japanese market over certifications, which has required vehicles to be held and re-certified or recalled.

Global vehicle sales dropped in the quarter on the interruptions in Japan, with North America and Europe seeing sales improve. Toyota is strongly advancing hybrid technology in 2024, and electrified vehicle sales reached 43.2% of global sales for the company.

However, Toyota operating income was negatively affected by increased spending on higher labor costs and R&D expenses, both relatively typical items for the cyclical auto industry, while increased marketing efforts positively affected operating income.

Tesla, Stellantis, Nissan see largest margin declines

Tesla's declining performance in the first half of 2024 is directly related to sales declines and pricing actions. Adjusting pricing has not provided the sales lift the company wanted, but it has drastically affected gross profit and margin.

Some of Tesla's sales struggles are related to natural consumer demand for BEVs beginning to take a slower growth pace than earlier years, but also related to fierce competition from technologically advanced startups, highly cost-efficient and sufficiently competitive mainland Chinese BEV automakers, and highly competitive competition from traditional brands. Tesla's financial results are impacted by economic conditions, BEV demand and a more complex and competitive vehicle landscape.

Though Stellantis did remain profitable, poor volume and mix along with currency translation pulled revenue down by 14%. Stellantis saw unadjusted operating profit fall about 51% and a margin decline of 5.9 points.

Some volume decline was on discontinued models in North America and inventory adjustments in Enlarged Europe. Stellantis difficulties in North America include inefficient marketing strategies and higher-than-necessary inventory growth.

Stellantis is among the automakers who has long struggled in the mainland China market. Moving forward, CEO Carlos Tavares is counting on a JV with Leapmotor to address mainland China as well as to provide an inexpensive BEV for production and sale in other markets, initially Europe.

Nissan saw flat sales versus the April-June 2023 period, and revenue improved. However, Nissan's operating income plummeted compared with a year earlier and margin dropped. Nissan largely blamed its North American performance for the weak result, announcing plans for salaried staffing cuts shortly after reporting results.

Nissan will optimize inventory buildup in North America in the second half of the company's fiscal year (October 1, 2024-March 31, 2025), including use of incentives, as well as maximize sales of new and refreshed models to right the ship. Weak US first-quarter sales were blamed on an aging portfolio and consumer interest in hybrids, which Nissan isn't currently offering in that market.

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This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.