3rd ICAI 2024

International Conference on Automotive Industry 2024

Mladá Boleslav, Czech Republic

(sales of 293,47 billion USD in 2022) followed by Toyota Motor Corporation (sales of 270,49 billion USD in 2022) and Stellantis (sales of 188,75 billion USD in 2022), see Statista (2023). According to market capitalization, Tesla is recently the most valuable carmaker worldwide (545.6 billion USD as of December, 31, 2023) followed by Toyota Motor Corporation (247.48 billion USD as of December, 31, 2023) and leaving the other automotive companies (like Porsche, Stellantis or Mercedes-Benz Group) far behind (e.g. the market capitalisation of Porsche as of December, 31, 2023 was 80.4 billion USD), see Companiesmarketcap (2023). Based on these facts, for the purposes of analysis in this paper, it is considered interesting to compare and examine in more detail the drivers and indicators of financial performance of the following carmakers: Toyota Motor Corporation, Volkswagen Group, and Tesla. In fact, we pick two major traditional carmakers accompanied by Tesla specialized in the production of electric vehicles (EVs). 2.2 Selection and Description of Financial Ratios As explained in the introduction to the chapter, the essence of the analysis in this paper is the comparison and interpretation of selected financial performance indicators of enterprises. The basic methodological approach is the DuPont decomposition of return on equity (ROE), which is the ratio of net income to book value of equity. The DuPont equation breaks down ROE into three fundamental components, which allow for determining how efficiently the examined entity utilizes its resources: 1) the operating profit margin as an indicator of operational efficiency that forms the net margin and indicates how effectively revenues are transformed into net profit, 2) the equity multiplier (total assets to total shareholders’ equity) as a financial leverage ratio that shows how much of a company’s assets are financed by shareholders’ equity and 3) the asset turnover ratio (sales to total assets) that measures how efficiently a company uses its assets to generate sales (Čižinská, 2018). Subsequently we will look at the future prospects of the companies under study through the lens of investors in the capital (specifically the stock) market, for which we will use capital market indicators such as price to book value and price to earnings. Price to book value (P/B ratio) is a financial ratio used to compare a company’s current market price to its book value. The book value is essentially the net asset value of a company, calculated as total assets minus liabilities (we do not subtract the book value of intangible assets such as patents, goodwill). P/B ratio provides an insight into how much the investors are willing to pay for a company’s assets relative to the value of those assets as recorded on the balance sheet. The price-to-earnings (P/E) ratio measures a company’s current share price relative to its per-share earnings (earnings after taxes attributable to shareholders per share). It is calculated by dividing the market value per share by the earnings per share (EPS). This ratio informs about how much the investors are willing to pay for a share relative to the income the company generates (see Čižinská, 2018).

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