A joint report released by Cox Automotive and Grant Thornton has revealed the true extent of the disruption to the automotive industry caused by the pandemic.
The report shows that all major manufacturers experienced significant losses in the early stages of the pandemic, from around March 2020. Chinese manufacturers were the first to be affected as plant closures slowed production, followed by the rest of Europe. However, major manufacturers such as Tesla, General Motors, Kia and Toyota all made profits in the second half of 2020, approximately halfway through the pandemic. Tesla was able to keep making profits by diverting manufacturing to China as the country recovered from the pandemic, just as it was spreading across Europe.
However, there were other factors outside of Tesla’s control that also contributed to the figures. Owen Edwards, Associate Director at Grant Thornton UK LLP, who wrote the report, said Tesla’s numbers “need to be reviewed carefully”.
“Tesla continued to benefit from both the strong rebound in the market and from other OEMs purchasing Regulatory Credits (also known as environmental credits). Therefore, removing the income from Regulatory Credits to leave only income generated from the production of vehicles meant that the business was in loss throughout Q1 and Q2 2020. Vehicles produced nevertheless continued to increase, and it was not until Q3 that Tesla’s normalised EBIT ex Regulatory Credits started to make profits,” said Edwards.
Other manufacturers that bounced back in the second quarter of last year include Ford and Stellantis. Both companies made cost reductions that had an effect on profits.
One company that was hit hard by the pandemic was Nissan, which made losses of $94bn and $153bn, in the first and second quarters of 2020 respectively. Nissan was already struggling pre-pandemic, and the slowdown in production exacerbated the losses. However, thanks to cost-cutting measures Nissan was able to report a profit in the third quarter of 2020. Honda and Mazda both followed a similar trend, with both manufacturers reporting profits in the second half of the year.
Philip Nothard, Insight and Strategy Director for Cox Automotive, explained what this means for the used car market:
“What these findings demonstrate is that the new vehicle market is not all doom and gloom, and manufacturers have done extraordinarily well to bounce back their fortunes with some using highly creative methods.
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“While there is no doubt that current well-publicised material shortages are causing a slowdown in the new vehicle market and impacting on used supply and demand, manufacturers have demonstrated that they can be agile and adaptable enough to ride these situations out, which offers some hope for future recovery.”
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