Accounts 2023 and prospects

Electric cars, alarm from German rental giant: fleet halved

Drop in residual value: -20%. For Sixt, Europe's third largest group, record turnover in 2023 (+18%) but declining EBIT. First quarter 2024 will be in the red

by Alberto Annicchiarico

1 March 2024

4' min read

Key points

Dividend down. 2024 starts with Ebit in the red
Market conditions and impact on profits
Electricity halved in one year

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4' min read

Sixt, the German car rental giant, the world's sixth-largest group and Europe's third-largest, after a 2023 second-best year ever in terms of consolidated revenues, expects a first quarter of 2024 in the red, due to deteriorating market conditions for used electric cars. According to preliminary calculations, the international mobility service provider reached EUR 3.62 billion in revenues, which corresponds to growth of 18.1 per cent year-on-year and 44.7 per cent year-on-year in 2019. The highest growth and expansion of market leadership was recorded in Germany (revenues +23.6%), followed by North America with revenues exceeding EUR 1 billion for the first time (+18.5%) and European markets outside Germany (+14.3%). Sixt expanded its fleet to a record size of 169,100 rental vehicles on average, up from 138,400 vehicles in the previous year (excluding franchises). The share price recovered 3.4 per cent in the Friday 1 March session, reducing the year-on-year decline to 5.49 per cent.

Earnings before interest, tax, depreciation and amortisation (Ebitda) also reached an all-time high of EUR 1.33 billion (2022: EUR 1.14 billion). Pre-tax profit (Ebt) of EUR 464.3m in 2023 marked the second-best result in the company's history, surpassing the record pre-Covid result of 2019 by more than 50 per cent and falling within the range communicated in early 2023. With an Ebt margin of 12.8 per cent, Sixt also significantly exceeded the minimum margin of 10 per cent.

A month ago, the German group reached a major agreement with Stellantis to supply 250,000 vehicles by 2026 in Europe and North America.

Dividend down. 2024 starts with Ebit in the red

This is where the positive news ends. Sixt, in fact, is slipping into the red and has had to halve its fleet of electric cars. By the way, in early December the German player had informed customers about the reduction in the number of Teslas available. Pre-tax profit in the first quarter of 2024 will be between minus 15 million and minus 28 million, compared to a positive 33.3 million a year ago. The main reasons for the poor consolidated result include higher interest expenses and increased depreciation and amortisation due to the collapse in residual values caused by the price war.

In fact, last year Sixt recorded a decline in pre-tax profit despite record highs compared to the pre-Covid period. The company announced that Ebt decreased by 15.6% to EUR 464.3m in 2023, based on preliminary figures. Shareholders will have to make do with a dividend that is described as 'attractive' but nevertheless reduced: they should receive EUR 3.90 for ordinary shares and EUR 3.92 for preference shares. The previous year's dividend was EUR 4.11 per ordinary share.

For the financial year 2024, the board of directors expects a pre-tax profit of between EUR 400 and 520 million. In view of the expected high demand and continued international expansion, Sixt estimates significant sales growth.

"Thanks to the trust of our customers and the excellent work of our employees," commented Alexander Sixt, Co-CEO of Sixt, "we were once again able to achieve record turnover and achieved the second best annual result in the history of our company. Our profits are even more remarkable when one considers the significant deterioration in market conditions for e-mobility during the year, rising interest rates, and continued high levels of investment".

Market Conditions and Impact on Earnings

The deterioration in market conditions includes, it was said, the sharply worsening environment for the sale of used electric vehicles during 2023. In Germany, for example, prices for these vehicles have fallen by more than 20 per cent in the past year. For Sixt, the decline in residual values of electric vehicles has led to an increase in depreciation and losses from the sale of vehicles, with a negative impact on profits in the order of around EUR 40 million for 2023.

At the same time, 'demand for electric mobility as a whole has not yet developed the momentum desired by policy, as the latest registration figures also show,' says the German company. Sixt has also suffered, despite having invested millions of euros in expensive marketing campaigns for electric cars and investments in charging infrastructure. The lower demand compared to traditional, internal combustion engines has resulted in a substantial loss of revenue. Sixt assumes that, without these two e-mobility-related effects, the last financial year would have ended with a higher operating profit than the record year 2022.

Electricity cut in half in one year

As mentioned, at the end of February the percentage of electric vehicles in the Sixt fleet had halved by 31 March 2023. "Compared to its competitors and in terms of its overall fleet," Sixt now "has a lower share of vehicles at risk," the company states. Electric vehicles 'will continue to form a part of the Sixt fleet in the future. However, further developments require a high degree of flexibility. The key factor is what customers demand of us. The cost situation also plays an important role, as do the (changing) long-term strategies of car manufacturers'. A similar turnaround regarding the electric car fleet had come in January from US giant Hertz.

Alberto Annicchiaricovicecaposervizio
Luogo: Milano
Lingue parlate: inglese (C1), buona comprensione di francese e spagnolo
Argomenti: economia, auto, tech, social media, seo, blogging, viaggi, food
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