The PSA turned out to be more profitable than BMW and Mercedes

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The PSA turned out to be more profitable than BMW and Mercedes

Profitability — the most important goal for automakers. This is so important for leadership some brands abandoned whole segments of cars.

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You would think that such luxury brands as Mercedes and BMW, are drowning in money, as customers order expensive modification of machines and packages, but the numbers tell a different story. According to a new report from analysts, in the second quarter of 2019 PSA Group, French manufacturer of cars for the mass market, a portfolio consisting of brands Peugeot, Citroen and others, became more profitable than BMW and Mercedes.

Thus, the EBIT (profit before tax and interest) fell to 2.8%, while Mercedes received a 1.4 percent operating return on sales. This is far below the EBIT of the group PSA, in which the margin was 8.7%. Even Skoda, one of the many main brands of the VW Group, had an EBIT-margin of 8.1%. It seems strange, given the high prices on BMW, Mercedes and other luxury cars, and expensive pziii packages.

However, while higher prices are the main product of this segment, experts believe that the low profitability of Mercedes and BMW may be the result of large investments in research and development than in previous years. It is the result of the introduction of new electric and Autonomous vehicle technologies. But that’s not the whole picture. Slowing Chinese market, along with the ongoing trade war between China and the United States, also causing financial problems for the two German automakers.

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And Mercedes and BMW saw great financial success on the growing Chinese market, but now they suffer from a reduction in the market. The PSA group has no significant presence in the country.