3rd ICAI 2024

International Conference on Automotive Industry 2024

Mladá Boleslav, Czech Republic

an activity that has a major impact on the market position and financial performance of companies is discussed by Belas (2018). Thus, the automotive industry continues to attract new investors, for whom (among other parties involved) an analysis of ROIC, WACC and growth may be useful. Return on capital employed, weighted average cost of capital and growth rate are essential indicators of a company’s value. This paper aims to explore the relationships between the above variables and analyze them quantitatively and qualitatively to understand the financial dynamics in the industry. The findings of this paper can help investors, managers, and analysts understand a company’s financial health and make informed strategic decisions. When we talk about the automotive market, we mean car manufacturers, motorcycle manufacturers, and car component manufacturers, which are equally important - a car is made up of tens of thousands of components. As part of the study, we analysed a total of 456 financial statements. Although our study resulted in a number of conclusions, this paper presents only a selection of the most interesting ones, given the limited scope of the publication. 2.1 Problem Formulation The aim of this work is • examine how the relationship between ROIC and WACC in the automotive sector evolves over time, • examine how the relationship between ROIC and automotive growth evolves over time. First of all, it is helpful to summarize the basic theoretical knowledge of the mentioned variables. As Koller, Goedhart, and Wessels (2020) write, the profitability of invested capital is primarily influenced by competitive advantage. Sources of competitive advantage may include price premium, cost and capital efficiency, and network economies. The maintenance of ROIC then depends on the length of the product life cycle, the maintenance of competitive advantage and the potential for product renewal. For example, the aforementioned authors classify the automotive industry (cars only) as a declining ROIC industry and the automotive components industry as persistently medium. Price premium can be related to luxury and performance brands that can charge high prices due to a strong brand image, unique design or advanced technology. Cost and capital efficiency is also a big issue in the automotive industry, as companies are constantly looking for ways to increase production efficiency and reduce costs without affecting quality. Automation and robotics are also related to this. The potential for product renewal here is great and is linked to the aforementioned trends in information technology. Koller, Goedhart and Wessels (2020) further describe (some) factors affecting growth, such as the dynamics of the product portfolio, the organic growth (or decline) that 2. Problem Formulation and Methodology

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