Oliver Wyman Unveils Comprehensive Labor Cost Per Vehicle Analysis Amidst Changing Automotive Landscape

Oliver Wyman, a global leader in management consulting and a business of Marsh McLennan (NYSE:MMC) today launches its latest Labor Cost per Vehicle analysis. As the automotive industry faces economic headwinds, shifting global production landscapes, and rising geopolitical tensions, this comparative analysis examines the labor cost per vehicle (LCPV), a critical metric that influences automaker profitability and competitiveness.

Getting Under the Hood of Automotive Labor Cost Per Vehicle, analyzes more than 250 vehicle assembly plants worldwide, revealing an average labor cost gap of nearly $1,700 per vehicle between premium European brands and Chinese manufacturers. The report identifies four groupings of car companies with similar labor-cost-per-vehicle attributes but often with very different challenges beyond labor cost, ranked from highest to lowest:

Euro Premiums: This group includes high-end European manufacturers characterized by elevated labor costs averaging $2,232 per vehicle. These automakers face challenges such as strong labor unions, stringent regulations, and complex manufacturing processes, which contribute to their high production costs. To remain competitive, they must consider restructuring their operations and optimizing their product portfolios.
EV-Only Manufacturers: This category consists of companies focused exclusively on electric vehicles, averaging $1,660 in labor costs per vehicle. Low production rates contribute to this group's relatively high production and labor costs. Further, low volumes make competitive labor productivity challenging, even with non-union wage rates.
Mainstream Model Manufacturers: Comprising traditional automakers from the U.S., Europe and Asia, this group averages a labor cost of $880 per vehicle. They benefit from diversified manufacturing networks and decreased production costs due to older factories and lower depreciation rates.
Chinese Car Manufacturers: This group has achieved significant efficiencies, with labor costs averaging $585 per vehicle. Chinese automakers have reduced engineered hours per vehicle and benefit from newer manufacturing facilities. Their strategy of producing fewer model variants allows for greater flexibility and lower overall production costs, positioning them favorably in the global market.

"Labor cost per vehicle has emerged as the new gold standard for evaluating manufacturing performance in the automotive industry," said Jim Schmidt, vice president in Oliver Wyman's Automotive and Manufacturing Industries practice. "In most mature auto-producing countries, labor costs comprise 65 to 70% of total manufacturing costs, providing insight into overall cost competitiveness."

The leading automotive manufacturing countries, due to their scale and prominence within the industry, largely account for the categorized evaluation of automaker types. While countries that are not of relative scale, such as Morocco, Romania, or Mexico, are not as easily classified into one of the four groups, their low wages and rising production volumes rank them as top contenders of manufacturing-nations with lowest labor cost per vehicle.

The competitive advantages of these production centers have attracted offshoring, especially from manufacturers in the mainstream model category. Morocco has become the low-cost production center for French manufacturers, and Mexico is positioned similarly for U.S., German, Japanese, and South Korean automotive manufacturers.

“As we see significant differences in labor costs across regions, manufacturers must strategically assess their operations and consider how these disparities can affect their market positioning, said Daniel Hirsch, Automotive and Manufacturing Industries practice partner. “The ability to adapt and optimize in response to these variations will be key to sustaining profitability and competitiveness in the evolving automotive industry.”

Looking ahead, we plan future releases and analyses over the next months on other critical industry topics, including tariffs, sourcing, battery electric vehicle demand, and Chinese expansion in the automotive sector.

About Oliver Wyman

Oliver Wyman, a business of Marsh McLennan (NYSE: MMC), is a management consulting firm combining deep industry knowledge with specialized expertise to help clients optimize their business, improve operations and accelerate performance. Marsh McLennan is a global leader in risk, strategy and people, advising clients in 130 countries across four businesses: Marsh, Guy Carpenter, Mercer and Oliver Wyman. With annual revenue of over $24 billion and more than 90,000 colleagues, Marsh McLennan helps build the confidence to thrive through the power of perspective. For more information, visit marshmclennan.com, follow us on LinkedIn and X.

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