- China is more than catching up
- The pricing power for OEMs came to a premature end
- Automotive Sales Transformation, the Direct Sales Model in Europe is history
The consequences of the global power shifts are immense. Starting with the slump in China sales for traditional OEMs, the consequences have now spread globally and put massive pressure on profitability. This has brought the era of pricing power for OEMs to a premature end.
The financial health of OEMs is deteriorating as declining profitability puts pressure on their balance sheets. We expect operating margins in the US and Europe to bottom out, but remain under pressure in 2025 and 2026.
We believe that the current operating profit margins of automotive suppliers do not yet fully reflect the significant pressure they are under, and therefore expect further downward pressure. The majority of EV players in the top 30 OEMs still have significantly negative operating margins, despite some improvements.
US tariffs make cars more expensive for customers and leave manufacturers with $7 billion in costs
US tariffs will result in additional costs of $35 billion for European manufacturers. That equates to around $2,240 per vehicle. Around $1,790 of this can be passed on to customers, which corresponds to around 80 percent. This leaves manufacturers with additional costs of around $7 billion.
Transformation of automotive distribution – OEMs are not lost, but they need to rethink their distribution models, leverage AI, strengthen fleet channels, and maximize after-sales to survive.
The direct sales model in Europe is as dead as the agency model, which is now only used by BMW and Mercedes. The legal framework severely restricts DTC and the agency model in the US. Only brands such as Tesla and Rivian still rely on it. Even in China, various OEMs are increasingly opting against direct sales. By 2030, DTC and agency models are expected to account for only about 15% of global new car sales.
AI in marketing and sales will save a lot of money but cost many jobs
AI in marketing and sales creates enormous opportunities to save costs per sale and improve the customer experience. The potential savings amount to around €6.2 billion (cumulative for the twelve major manufacturers). However, many jobs in sales and marketing at OEMs will be lost due to AI.
The twelve largest OEMs currently employ around 95,000 people in sales and marketing, with up to 12,000 full-time positions at risk from AI. Around 12% of jobs are likely to be lost.
It is essential that sales organizations adapt.
