Toyota, GM and Daimler fail to rescue the UK car market
Automotive is Britain’s leading manufactured export segment, accounting for over 6% of its total exports. In UK, every year more than £2 billion is invested in Automotive R&D. In Britain, 4 out of 5 cars manufactured are exported to different countries and it’s a hub for vehicle designing. The British car market is facing tough times amid Brexit uncertainty and is undergoing a paradigm shift.
Fear from Brexit
A no-deal Brexit will add extra costs to supply chain systems which are currently in place. The extra costs are a common cause of concern for any sector in Britain, forcing them to pile up on stocks in advance to avoid any near future disruptions. A no-deal Brexit will add quotas or tariffs to a large chunk of exports from the UK to the EU, also adding to their costs. Also, the EU has agreements with several countries over tariff-free access to their markets which British manufacturers shall lose after a hard exit.
The car manufacturers in the UK were already under pressure from domestic turmoil and lower than anticipated sales, what sent them reeling is a growing shift in consumer requirements. Due to bad show from several major automobile companies across the world, investor confidence is dampening, while companies were forced to cut-down on the pay-outs. The industry is fast pacing towards electric vehicles and what could be costly in the long run is cutting down on R&D expenses presently. In order to meet the changing customer taste, the companies are forced to be innovative with their line-ups. These changes require a lot of R&D, requiring the investor backup.
Toyota, GM and Daimler
The trio spearheads the car market as one in every five cars that is sold anywhere around the globe, comes from this shed. The market which was already down could not look up to the trio for help. The results concluded for all three showed a decline in profits.
Mercedes owner, Daimler, reported a 28% fall in its net profits – Euro 7.6 billion in 2018. Toyota’s net profit declined 81% for October-December quarter, at the same time GM’s 4Q operating profit dropped by 8%.
One of the major concerns with regards to ongoing challenging trend was slowdown in China. Last year, Volkswagen and Ford had issued warnings for their Chinese arm.
GM’s chief financial officer, Dhivya Suryadevara, also issued a warning, as he mentioned that increased commodity prices in China, fired by the US tariff war in China coupled with the slowdown would hit the company with another $1billion, which already lost $1billion to it last year.
Dieter Zetsche, chief executive of Daimler said the company is looking forward to freeing up its cash to invest in electric and autonomous vehicles and other technologies, and it is making a cost-cutting program for the same.
In terms of stock price, Toyota (TYT) was last seen to trade at JPY 6460 on February 08, 2019 post a downtrend that was seen during mid of last week. In fact, last week, Daimler was also sitting at a lower level at EURO 51.95. GM closed at USD 38.7 on February 08, 2019.