In the merchandise line position, BMW merely makes rare wheel thrust and all-wheel thrust autos, rear wheel and all-wheel thrust autos are good at public presentation, nevertheless, best public presentation is a trade-off of less infinite and higher cost of fabrication. These autos are all premium autos with the minimal gross revenues monetary value of EUR 25,000 in the Netherlands. VW makes chiefly front wheel thrust autos and all-wheel thrust autos for their premium autos. It has a really broad scope of autos in their merchandise line. The minimal gross revenues monetary value is EUR 7,900 and the most expensive VW auto “ Phaeton ” at the monetary value of EUR 88,000. With this monetary value scope, VW can pull clients from different income degrees. VW has the less competitory advantage in the premium auto sector comparable to the BMW. But in the lower category, VW owns a bigger market portion since BMW does non bring forth lower category autos. For the people who would wish to hold a auto for merely metropolis usage, which they would usually see a smaller size and economical vehicle, VW can offer “ Up ” and “ Polo ” depends on client ‘s specific needs. This is what BMW is unable to offer to their clients. In instance of in-between category autos, VW has “ Golf ” and “ Passat ” which is the direct rivals of BMW ‘s “ 1-series ” and “ 3-Series ” . VW ‘s monetary value is around 25 % cheaper to BMW ‘s at the same category degree. Of class, people can besides take high premium car between VW ‘s “ Phaeton ” and BMW ‘s “ 7-series ” .

In the market position, BMW ‘s selling scheme is to demo the luxury and alone design of its trade name image. Therefore, they ever use universe celebrated managers and creative persons like John Frankenheimer and Clive Owen. “ Awesome ” is the most feedback or remarks left on the youtube version. When we look at VW ‘s advertizements, they chiefly focus on the practicality and dependability of the auto. There is no excess gorgeous and “ Awesome ” experiencing demoing to people. Reliability and practicality are what they would wish people to retrieve. That ‘s besides the psyche of their trade name image.

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In the fiscal position, BMW had reported EUR 68,821 million in gross, EUR 7,236 million in runing income and EUR 4,907 million in net income in 2011 while VW reported EUR 159,337 million in Revenue, EUR 18,826 million in runing income and EUR 15,409 million net income. BMW ‘s operating and cyberspace borders in 2011 were about 10.5 % and 7.2 % while VW ‘s operating and cyberspace borders were about 11.8 % and 9.7 % . Harmonizing to the “ Margins by sector 2011 ” researched by Aswath Damodaran in 2012, the planetary norm runing border and net border in the automotive sector is 6.99 % and 3.36 % . BMW and VW have reasonably similar runing border, nevertheless, VW has more other income which is non-core related income than BMW has which resulted in a higher net border ratio. From the figures above, both BMW and VW are executing better than the industry equal informations. Free hard currency flow over gross, BMW achieved 2.96 % while VW ‘s ratio was -0.79 % . The difference is chiefly due to the 10 times higher acquisition costs used by VW than BMW. This is another difference in the concern theoretical account. As described in the VW background below, in order to accomplish the widest merchandise scope, VW has acquired many other car shapers like Audi, SEAT, Scania and so on, where, BMW focuses chiefly on its premium BMW and MINI trade names.

In the design position, BMW ‘s design looks rather posh and aggressive, gives people the feeling of “ love it at the first sight. ” And VW ‘s design is pretty moderate, but reasonably popular. It gives people the feeling that it is a dependable auto which you can bask with. The difference in design makes BMW and VW holding different client group. Peoples who drive BMW are in general rather exalted tone while VW drivers are in general reasonably low cardinal people.

In the environmental friendly position, BMW will present their to the full electronic “ i3 ” and “ i8 ” at the monetary value which people can barely afford. ( EUR 50,000 and EUR 100,000 ) The high monetary value is chiefly related to the new fibre stuff used that can take down the weight of the auto. VW is besides working on their to the full electronic auto, eGolf with the expected gross revenues monetary value of EUR 30,000. BMW builds “ i3 ” and “ i8 ” in order to show their advanced engineerings to the populace while VW is be aftering to function their clients with economic benefits.

Selling, R & A ; D and premium stuffs result BMW ‘s large demand for capital. VW ‘s extremely diversified merchandise line besides requires large money. As the automotive industry is a extremely competitory market which supply is far complete demand, companies usually spend 1000000s of Euro on selling, publicity, franchise fees, and stock retentions. Fuel efficiency continues to be the premier consideration for car manufacturers due to higher push in the EU. In order to accomplish it, new types of engines, lighter and safer stuffs, and new characteristics need to be developed. European car manufacturers will pay 100 % of attempts to increase the efficiency even for 1 % . To accomplish them all, acquiring a proper finance construction is highly of import for the auto builders.

Before we go profoundly into this research, allow ‘s possibly first take a expression at the basic information about the recent planetary economic environment, the companies and the automotive sector analysis which is included in this research.

BMW background

BMW ( Bayerisch Motoren Werke ) G.m.b.H founded in 1916, is one of the largest industrial companies in Germany and it is besides one of the most successful autos and minibike shapers in the universe. The BMW group owns the universe strongest premium trade names, BMW, MINI and Rolls-Royce. BMW sets the highest criterions of aesthetics, kineticss, engineering and quality which make them being at the taking place in footings of technology and invention. A new mark was set in 2007 with the acceptance of Strategy Number ONE. This new scheme focuses on the way of the accent on profitableness and long term value growing. The activities remain steadfastly on the premium sections of the auto markets. The mission statement up to 2020 is to be the universes ‘ taking supplier of premium merchandises and service for single mobility. BMW ‘s long-run thought and its responsible action make their success. “ Endeavoring for ecological and societal sustainability along the full value-added concatenation, taking full duty for our merchandises and giving an univocal committedness to preserving resources are premier aims steadfastly embedded in our corporate scheme. ” Because of the above ground, BMW has been elected as the most sustainable company in the automotive industry for rather some old ages.

In order to fix for the fiscal crisis, BMW prepared their short term and long term programs in 2009, “ crisis direction ” for short term and “ investment in our hereafter ” for the long term. Crisis direction purposes to increase runing working capital and cut down costs all around the company to increase profitableness and liquidness. With clear aims set by the direction, employees were to the full cognizant of the way company is taking, what the aims are and the significance of their plants. The undertaking is besides known as “ ONE ” as mentioned above. Besides the undertaking “ ONE ” , BMW had invested 1 billion Euro in Europe, 750 million Euro in the US and 600 million Euro in China every bit good as in other emerging markets. In return, the BMW group had a strong grew from 2009 in the emerging markets. The gross revenues increased by 37.5 % in China, 118.8 % in Brazil, 24.4 % in India. New gross revenues records achieved in the above three emerging markets. In the US, the BMW group is non making every bit good as in the emerging market in 2009. 20.3 % decreased in the US market, but this is non a bad figure, VW lost 21 % in the US market while Toyota and other US auto shapers faced the diminution of more than 40 % . With 196,502 units sold, BMW remained its best executing European premium auto trade name in the US market. The gross revenues in Asia increased by 56.3 % in 2010 and chiefly contributed by China in regard of farther investing in the emerging market. The US market rose by 10.1 % in 2010. And Italy was the lone exclusion in the Europe which had negative growing in the BMW ‘s European market.

Invention is another key to the successful scheme during fiscal crisis period. Eight updated theoretical accounts and ten new merchandises were launched from 2009 to 2011. The new theoretical accounts besides included some “ Efficient Dynamic ” versions which have lower ingestion and revenue enhancement charges.

With all the attempts and schemes BMW had made during the fiscal crisis, in July 2011, BMW ‘s long term and short term evaluations were increased by one degree from A3 / P-2 to A2 / P-1 by Moody ‘s, one of the large 3 evaluation bureaus. In September 2011, Standard & A ; Poor peoples confirmed BMW ‘s A- / A-2 evaluations and adjust its mentality from stable to positive. The better evaluation confirmed by the evaluation bureaus can be seen as a positive intelligence which means the demand of the BMW merchandises is increasing every bit good as corroborating the new concern scheme taken by the BMW group. With strong recognition worthiness means the BMW group owns a stable fiscal place and investor assurance which guarantee the BMW group have the best entree to the planetary capital markets.

Harmonizing to Chart 3.1 in Appendix B, the BMW portion monetary value was of class besides affected by the economic system downswing. BMW ‘s portion monetary value had lost 12 % in 2011, it hit its highest in July 2011 at EUR 73.85 and its lowest in 2011 in October at EUR 43.49. BMW ‘s portion public presentation is outperformed than DAX market index chiefly due to BMW ‘s portion scheme. BMW enables their employees to ain portions, history shows that this has been a key of success for more than 30 old ages. BMW ‘s direction board has decided to publish 407,960 non-voting portions of preferable stock in 2011 and these preferable stocks were instantly being bought back via the stock market in order to function the employee portion plan. The bargain back action has stimulated the portion monetary value as the market would believe that BMW directors consider the current portion monetary value being under valued. Therefore, they bought back the portions for fillip intent. This is besides the ground why the BMW portion monetary value reached its 10 twelvemonth high in 2011.

VW background

The VW ( Volkswagen ) group is one of the universe taking automotive shapers and the largest car shaper in Europe. They have every bit much as 10 intriguing trade names which offer mobility in every auto category in order to make the highest outlooks. “ All around the Earth, diverseness is our great strength and an of import drive force. ” VW presently owns the undermentioned trade names, Volkswagen, Audi, SEAT, Skoda, Bentley, Bugatti, Lamborghini, Scania, VW commercial vehicles and MAN. These trade names cover about all vehicle categories in the universe. Therefore, the competition is strong due to the big sum of rivals in different markets. Their 2018 mission statement is to be the universe ‘s prima automotive maker with the aid of their chase of invention and flawlessness and their responsible attack, both economically and ecologically, said by the president Prof. Dr. Martin Winterkorn of the board of direction.

To contend against the fiscal crisis, the VW group sets their scheme in the undermentioned 4 facets: Working capital optimisation ( i.e. Inventory ) , Maximize liquidness, Flexible labour contracts, and Localization. VW has increased their gross revenues outstanding yearss from 20.23 in 2009 to 18.09 in 2011. The yearss of stock list has improved from 63.63 yearss in 2009 to 54.97 yearss in 2011. The collectible period has increased from 39.65 yearss in 2009 to 40.10 in 2011. This has improved the operating working capital by entire 11.16 yearss which helps to shorten the transition rhythm by 10.58 yearss on mean compared between 2009 and 2011. The improved on the job capital helped company besides with their liquidness aim. Flexible labour contracts help the VW group to hold the flexibleness for the work force in instance the gross revenues volume supports dropping without paying high compensation when disregarding people. VW has besides localized their production in the emerging market. To certain fortunes, the VW group believes that localisation can better the on the job capital and suit the merchandises better locally. In return, the VW group had increased their gross revenues in the emerging market by 119 % since 2009 which was chiefly contributed by China. The group gross had risen by EUR 54,150 million or 52 % when we compared 2009 to 2011.

VW has the same recognition evaluation as BMW ‘s issued by the Standard & A ; Poor ‘s and Moody ‘s, but with 1 degree lower mentality confirmed by Moody ‘s at “ stable ” . Moody ‘s believes that the VW group has a strong fiscal place due to the company ‘s improved earning prognosiss for 2011 and 2012.

Let ‘s take a expression at Chart 3.2 in Appendix B, VW ‘s portion monetary value was extremely fluctuated in 2011 due to the unstable universe economic system tendencies. Like BMW, VW ‘s portion besides outperformed the DAX twelvemonth on twelvemonth. VW ‘s portion monetary value had besides reached its annual high at EUR 151 in July 2011, and its annually low at EUR 88.54 in October 2011. VW had besides increased their dividends by EUR 0.4 billion in 2011 showed investor a strong assurance of the company ‘s hereafter from the board of direction. If we ignore the biggest addition in 2007 and 2008 due to VW ‘s rejection to Porsche ‘s return over command and following command made by Porsche in 2008, the VW portion monetary value is besides holding a better public presentation pre to the fiscal crisis.

As shown in the chart 3.1 and 3.2, BMW and VW ‘s portion monetary values had lost more than 50 % during the debt crisis. But their portion monetary values are back to the pre-crisis degree or even somewhat better. The DAX ( German stock index ) was affected by the systematic hazards and dropped aggressively over these old ages. In 2011, the DAX index had lost 14.7 % where EURO STOXX 50 dropped by 17 % . Throughout 2011, the German stock market has had a better public presentation than mean European stock markets. This was chiefly due to the strong export figures supported by the weak Euro exchange rate. Germany has the outstanding public presentation in the EU member provinces in regard of the economic recovery. BMW has already achieved their gross revenues mark for 2012 in the first half twelvemonth. VW has had really good gross revenues in the first half of 2012 as good. In Chart 3.3, we can unclutter see the differences and comparing of both companies harmonizing to what we have mentioned above.

Chart 3.3: BMW and VW public presentation comparing

From the Chart 3.4 and Chart 3.5 in Appendix B which BMW and VW portion information is displayed, we clearly see that neither of the companies has issued any new equity during fiscal crisis. Mostly likely, companies think that their portion monetary values have been undervalued during this period and in order to maintain the stockholder happy by holding good portion public presentation. Choosing non to publish new equity might be the best solution as publishing new equity is being considered as negative impact on portion monetary value since market believes that director considers overpriced portion monetary value.

Chart 3.6 in Appendix B shows companies ‘ long term debt places throughout the fiscal crisis. From the chart, we can clearly see that the BMW group has increased their long term debt place by 75 % where the VW group has increased their long term debt place by 52 % . The addition can be explained by the excess assets companies have generated during the fiscal crisis, every bit good as the inexpensive debts companies can entree to. Germany is considered as the safest state within EU member provinces, fixed income investors are seeking to hold the best hazard free assets in their portfolio, hence increase the demand of the German bonds. Based on the informations offered by as of 21-9-2012, German 3 month bond ‘s output fell to -0.03 % . By sing BMW and VW as the safe corporate bonds which they remain good rated by the evaluation bureaus. Investors are willing to hold less in return to avoid hazards. These all provide BMW and VW better opportunity to bask the lower involvement support. As mentioned above, both companies have increased their gross by concentrating on emerging markets, hence, excess adoption costs or involvement costs are non a large job for these fiscal wellness companies. Thank to the lower debt costs, companies can cut down their leaden mean cost of capital, which will besides assist them to diminish the price reduction rate they use to find new investings. The low price reduction rates used can assist the companies have higher NPVs or net present value of different undertakings, and have more picks in undertakings. Due to the fact that focal point on the automotive industry is presently traveling into emerging markets, BMW and VW program to hold more fabrication bases built in the emerging markets to cut down the bringing clip, labour costs and transporting costs in order to be more competitory in the markets.

Global economic mentality 2011 – 12

“ The optimism at the start of 2011 was founded on strong planetary economic growing, but developments throughout the twelvemonth mean that we enter 2012 in a much gloomier temper. Inflation, lifting unemployment and much weaker than expected growing out bends in 2011 mean that run intoing the asceticism challenge is traveling to be painful in 2012. But there is some good intelligence. The US economic system seems to be dragging itself out of the stagnations and planetary fabrication studies have picked up. However, there are still tonss of uncertainnesss, peculiarly where much of the mentality depends on planetary developments we ca n’t command. It looks like 2012 will be a hassle between the hope of a continued recovery in the US and the fright of a declining Eurozone crisis. ” Said by the RBS main economic expert Andrew McLaughlin in the beginning of 2012.

“ A recession in either Europe or the United States entirely may non be plenty to bring on a planetary recession, but a prostration of both economic systems most probably would. ” The planetary debt crisis has been non even recovered since 2009, well slower growing in 2011 in the western states. Economists forecast a little growing in 2012 and 2013, but the growing is far more non plenty for the universe economic system to be recovered, particularly in the developed states. There are excessively many jobs left in the fiscal recession in 2008 boulder clay 2009. Below chart 3.7 in Appendix B shows the growing of universe end product outlook harmonizing to the United Nation appraisal. From the chart, we can see that both European Union and USA were non expected to hold optimistic growing, and end product decreased by -1.2 % and -1.1 % since June 2011. Harmonizing to the current position, neither the US nor the EU can make the outlook. BRIC ( Brazil, Russia, India, China ) states ‘ appraisal and public presentation are still outstanding, particularly China, has merely lost -0.1 % since June 2011 and the expected growing rates of 8.7 % in 2012 and 8.5 % in 2013. Lower growing rate universe broad causes policy shaper to maintain the involvement depression. The federal financess involvement rate will be kept at its current degree of between 0 % and 0.25 % and anticipate boulder clay 2014. The ECB is besides expected to cut the official rate by 0.25 % by the terminal of 2012, first clip in the history to be below 1 % . The ECB will go on to supply liquidness to the fiscal market by its limitless crowned head bonds buying program and the LTRO to the major fiscal establishments. The LTRO bases for Long Term Refinancing Operations, which means the ECB provides low involvement long term loans at 1 % to European Bankss and other fiscal establishments to assist with their liquidness direction. The Bank of Japan is expected to maintain its current 0.05 % involvement rate and go on to pull off the market liquidness via Assets Purchase Program ( APP ) such as bonds and hazard assets buying. And due to high rising prices rate in China, the People ‘s Bank of China is expected to keep their current pecuniary policy, but at that place will besides be a certain sort of sterilised bonds buying program to excite the domestic ingestion growing, which is the weakest sector in the China ‘s GDP growing.

Although the policy shapers have done what they can so far to maintain the official involvement rate low and supply excess liquidness to the fiscal system, Bankss are non willing to impart money to the populace due to their ain capital and liquidness ratio readying for the on-going recognition crunch. What the bulk of the Bankss does is to lodge the adoption they received at 0.75 % in the ECB, which means a 0.25 % loss annually on these sedimentations. Less loaning from the European Bankss makes the European car shapers to acquire proper funding more hard. Investors are non willing to put on the line their capital.

Lease auto is rather popular in the European companies. In order to cut costs, many companies have set stricter rental auto policies that affect the gross revenues of the European automotive industry. Lower spent on norm besides caused lower auto demand. Assurance and capacity of disbursement is sensitive to the economic rhythms. Large disbursement will likely be postponed under the fortunes that the occupation is non secured and existent estate concern beads. Therefore, purchasing new autos will besides be postponed because of the above mentioned.

In the 2nd half of 2008, due to the fiscal crisis or the banking crisis, the economic downswing had hit the automotive industry to a great extent. In order to maintain high liquidness within the houses, companies were keeping tight on their leasing auto policies. Persons were besides afraid to purchase new autos since they lost the safety of their occupations. The gross revenues bead of the new autos in Europe in the first half of 2008 was merely 2 % , where in the last one-fourth of 2008, the bead was 19.3 % . Some EU provinces announced the diminution of more than 50 % in December 2008. In entire, the European auto demand dropped by 24 % in 2008. In 2009, commercial vehicle gross revenues were still in the large downswing. The loss on rider autos retrained to 15 % which was stimulated by the debut of the reclamation inducement in some EU member provinces.

However, the East Asian fiscal system is different than the Western fiscal systems since it was less integrated into the world-wide fiscal system. There are non much advanced fiscal services and merchandises like sub-prime loans and mortgage backed securities. That ‘s why the demand of personal vehicles did n’t diminish but increased during the universe debt crisis. See chart 3.8 in Appendix B.

Sector analysis

The European car industry analysis

European Union ( E.U. ) is good known as the topographic point to hold the competitory and advanced car industry which creates value from stuffs to R & A ; D to manufactory, to gross revenues and after gross revenues service. Highly skilled workers are trained in the European automotive industry. Status shows that around 2 million European occupations and 10 million worldwide occupations are created by the European automotive industry. It besides creates EUR 70 billion export per one-year. On a annual footing, EUR 20 billion is invested in R & A ; D in Europe, this figure is much higher than any other sectors. It keeps sustainability being an on-going event. Not like earlier, R & A ; D for automotive industry merely involved with auto engineering, presents, R & A ; D is involved in every individual corner of the automotive industry. It has been the most of import country in vehicle safety, energy efficiency, and environmental friendly, every bit good as the interactions between the vehicle milieus and driver that can loosen up the driver. As we may cognize, advanced vehicle is built based on the past R & A ; D investing every bit good as accomplishment. These investings have created many touchable and intangible assets for the European car shapers.

VW foremost introduced its TSI engine in 2008 which made a 1.4 litre turbo engine holding the same end product as 1.8 litre normal engines. It reduced fuel ingestion by 20 % . BMW besides started in 2011 to add a turbo to their engines and introduced one engine household thought. The one engine household means with the same 1.6 or 2.0 liter engine, by adding different power to the turbo, the same engine can be classified from 1.4 litre to 2.8 litre. The invention of one engine household saves BMW the costs of puting up different production lines for different engines. These engineerings are non built in 1 or 2 old ages, they are usually come ining the market with one million millions of Euro and figure of old ages behind. Time is the most of import factor to convey the new invention or engineering to market successfully. Like any other concerns, the attempts of R & A ; D can merely get down to bring forth economic value after a certain period of development, integrating and proving. Like an old expression, “ hastiness makes waste. ” Some auto shapers who does n’t esteem the clip of R & A ; D can non win to convey invention and new engineering to market. Due to the restriction of the resources of the Earth, auto shapers are looking for new types of energy, like electric or solar energy vehicles. BMW is presently developing the first electrical luxury auto in the universe, called “ i3 ” and “ i8 ” with patented battery and transmittal theoretical account. Since the scheme BMW pickings is to be the market leader in invention, hence, I think “ showing-off ” the advanced engineerings on i3 and i8 is more considered by BMW so truly selling them. The monetary values of i3 and i8 are high compared to other intercrossed or to the full electronic autos. However, by accomplishing this, BMW can calm their advanced trade name image. Harmonizing to the research done by ACEA ( Association des Constructeurs Europeens d’Automobiles ) in 2009, 53.7 % of the patents in the automotive sector was contributed by the EU member provinces. Most of these patents can be either sold or generate future income for the European auto shapers.

Market inducement is the key to ease the impact of the fiscal crisis which can besides promote fleet reclamation. Many EU member provinces have announced market inducement like revenue enhancement decrease on clean new vehicles. And thanks to the entree of the inexpensive loans, car shapers started to offer a 0 % involvement rate for their new clients. The market inducement and inexpensive loans helped the European car manufacturers with their fleet reclamation and draw back the gross revenues. Car shapers are making what they can to emerge from the fiscal crisis. Reducing impermanent contracts, vehicle end product and working hours may assist them to stay a extremely skilled work force.

The North American automotive industry analysis

GM ( General Motors ) , Chrysler and Ford, the large 3 US automotive makers had been on the top intelligence in 2008 due to their hapless fiscal public presentations. GM and Chrysler were eventually supported by the US authorities, and Ford walked through its hard state of affairs by holding its invention and new concern scheme. Like Ford did, GM and Chrysler had to cut their costs and put in their R & A ; D and redevelop their schemes. Finally, we see that their gross revenues figures are mounting up this twelvemonth and return to the chief subscriber of the US GDP once more after recent old ages. Harmonizing to the below chart ( chart 3.9 in Appendix B ) , rough oil monetary value reached its sky high sum of USD 147 per barrel in the mid of 2008. The chief thrust was due to guess. And due to the fiscal crisis, it was dumped to USD 30 per barrel at the beginning of 2009. Throughout the past 3 old ages, rough oil monetary value climbed above USD 100 and remaining at the monetary value of USD 91 on 24-9-2012. The effect of the high petroleum oil monetary value is that consumers are switching from high fuel ingestion vehicles like most made by the US auto shapers to lighter or compact autos. The American large 3 ‘s gross revenues dropped dramatically as people tend to purchase more fuel economic system autos. Germany and Japan are so far the most popular manufacturer of these compact fuel efficient autos. The American large 3 eventually requested bailout from the US authorities.

The Chinese automotive industry analysis

The Chinese has been the largest in the universe in footings of unit merchandising for 2008. In 2009, the production units in China equals the sum of the European Union, the US and Japan. 44.3 % of the entire productions in China are local trade names. The remainder is made by the Joint venture companies like VW, BMT, Toyota, General motors, etc.

In 2009, 13.79 million of vehicles were produced in China, of which 58 % were personal / rider autos and 25 % were commercial autos. The entire vehicle production and gross revenues figure reached 18 million units in 2010. In 2009, the registered vehicles reached 62 million and expected to make 200 million in 2020. Harmonizing to what McKinsey & A ; Company estimates, China ‘s automotive market will increase tenfold from 2005 to 2030.

From the below tabular array 1.8, VW is really holding really good growing in China in footings of growing in production. This is chiefly due to the fact that VW was the first car shaper who entered China in 1982. VW is besides the first 1 who accepted joint venture policy in China. Exchange engineering with market portion was the thought behind all these concern determinations.

Table 1.10: China ‘s 10 largest rider Vehicle shapers

China ‘s 10 largest rider vehicle shapers


Unit of measurements 2010

Growth 2010



16.26 %

Shanghai GM


42.87 %

Shanghai Volkswagen


37.50 %

FAW Volkswagen


30.01 %

Chongqing Changan


36.93 %

Beijing Hyundai


23.27 %



34.87 %

Dongfeng Nissan


27.37 %



15.93 %



21.24 % .



Market portion:

57.00 %

( Beginning: )

Both BMW and VW have attracted their clients by their unique and modern design of the mentality, every bit good as the technology invention. The fiscal crisis is a large challenge for the European automotive shapers. On the other manus, the European automotive industry is besides an industry with strength and comprehensiveness. It will and I believe it can come through the current fiscal crisis and contribute to the EU economic system and make a more sustainable hereafter if the right supports are at that place by the policy shapers.

Data and empirical design

I select the BMW and VW in the DAX stock exchange market as the research marks. These two companies are concentrating different market marks and cover about 60 % of the German auto market share.A Due to a different concern theoretical account, I would wish to analyse the different capital construction for both German companies. I collect the one-year information of those companies from Morning Star for the period between 2002 -2011. The 10 twelvemonth clip period helps to capture the companies ‘ midterm behaviours every bit good as the behaviours during fiscal crisis on optimum marks. For each sample company, I set up the purchase ratio based on Debt / Equity, both are at just value. In order to prove the consequence of possible determiners of purchase pick, I create a figure of related variables, viz. Size ( market capitalisation ) , Growth Opportunities ( market over book value of equity ) , Profitability ( EBITDA over entire assets ) , and Liquidity ( current assets over current liabilities ) , Tangibility ( measured as net PPE over entire assets ) , R & A ; D cost ( measured as the cost on research and development over gross ) every bit good as the operating hard currency flow. Overview of the above mentioned variables and definitions is shown in the appendix.

These informations are available in the Morningstar database system. The sample period is selected for 10 old ages as mentioned above. The ground of non picking longer period is that the result would break depict the companies ‘ fiscal behaviours during the latest debt crisis which can assist us to understand better how the successful companies like BMW and VW trade with their support determinations when the universe economic system is in trouble. The variables sample norms are calculated by SPSS. The dependent variables are measured during 2002 to 2011, market capitalisation, market to book ratio, EBITDA over entire assets, current ratio, company ‘s tangibleness, research and development cost and operating hard currency flow are besides measured from 2002 to 2011. The variables are calculated harmonizing to what old researches have done so far. MACP is the market capitalisation, MACP / TE is market to book ratio which is market value over entire equities, EBIDA / TA is EBITDA over entire assets, CA /CL is current ratio which is current assets over current liabilities, PPE / TA is company ‘s tangibleness which is Net works, belongings, and equipment over entire assets. RD is research and development cost ( in million ) , the RD / Revenue is the Research & A ; Development costs over entire gross and OCF is the operating hard currency flow.

It needs to be noted that the sample size in this research is little compared to the old researches done by other people as this research chiefly focus on the most successful automotive companies pull offing their support determinations during the debt crisis. I think this is something more interesting than the general capital construction research. On the other manus, due to the bound sample size and period, the fluctuation of the independent variables could be reduced.