MUNICH (dpa-AFX) - Carmakers' profit margins could be halved in the next two years, according to management consultants Bain. The reason, it said, is rising costs, declining demand and falling prices. "Volume manufacturers in particular will suffer from the fact that their customers will hold back on new car purchases due to the economic situation," said Bain industry expert Klaus Stricker on Tuesday.

He said automakers recently had an average of 8.5 percent of sales left as earnings before interest and taxes - a record earnings margin. Because semiconductors and other parts were in short supply, manufacturers had focused on more profitable models and pushed through higher prices. But now the supply of semiconductors is improving, while the economic situation is worsening: "As a result, cut-throat competition is setting in, and high prices will fall again due to sales promotion measures, while costs are rising due to inflation."

Tougher times are beginning for automakers, he said: "Measured against the record levels recently achieved, average margins for automakers could effectively be cut in half," Stricker said. The consultants expect Ebit margins to average 4 to 6 percent over the next two years.

Suppliers have already been struggling with declining profitability for two years, they said. Due to high material and energy costs, their margins fell to 4.5 percent on average in the first three quarters of 2022, they said. Yet for years before the Corona pandemic, it had been 1 to 2 percentage points higher than the manufacturers' margin, at 5 to 8 percent.

"Automakers will only achieve their goals together with high-performing suppliers," said Bain partner Dominik Foucar. "They need to be more careful than ever that they don't overstretch their partners, or they will soon have to support system-critical suppliers."

Automakers should try to "bring customers up to speed on the higher prices for electric mobility," keep production capacity rather tight, cut offerings and features that can't be monetized, and reduce specifications, he said. Carmakers are still heavily dependent on individual sales markets, suppliers and system partners in some cases, he said: more footholds would be better./rol/DP/jha