Digitalization does not bring profit to companies in the automotive industry, but it rapidly increases the efficiency of asset use

The use of modern digital technologies does not contribute to increasing the profitability of companies in the automotive industry, but it significantly helps to improve the efficiency of asset use, with visible effects almost immediately, shows a study funded by the European Union through the PNRR and conducted by researchers from the Faculty of Economic Sciences and Business Administration (FSEGA) of Babeș-Bolyai University (UBB) in Cluj-Napoca, together with researchers from Corvinus University of Budapest (Hungary) and Aalborg University (Denmark).

The researchers analyzed the financial impact of digitalization over different time horizons, investigating the immediate effect (in the same year), and over a period of one and two years, respectively. The results show that digitalization does not generate an impact on profitability even after two years, but instead contributes almost immediately to increasing the efficiency of assets that include, among others, the machines, equipment and technology used by these companies.

“The automotive industry has always been among the first to implement modern technologies in previous industrial revolutions, and this is also confirmed in the case of digital technologies in the fourth industrial revolution. The results of the study are surprising: increasing the intensity of use of these technologies does not lead to an increase in profitability either in the short term (in the same year) or in the medium term (1-2 years), even in the context in which the research was conducted within the most performing companies in the global automotive industry. On the other hand, however, the efficiency of asset use increases both in the same year and over a time horizon of 1-2 years,” says Prof. Dr. Levente Szász, UBB Vice-Rector, coordinator of the research project.

Thus, according to UBB researchers, the profitability of digital technologies is not, for the moment, clearly outlined: digitalization has a low, but positive impact on financial profitability, the effect being visible only at least two years after implementation. The UBB researchers’ project focused on traditional digital technologies that emerged in the previous industrial revolution, with the development of electronic computers and automation in production (Industry 3.0), which include robotization and automation in production, telecommunications, as well as the execution of operations in the online environment.

The study also explicitly analyzed the most modern technologies of the fourth industrial revolution (Industry 4.0), such as sensors, cloud computing, artificial intelligence or nanotechnologies.

The UBB-FSEGA research was carried out within the project Strengthening the digitalization of businesses in Eastern Europe – a micro and macro-level approach, worth 1,415,964.77 euros (6,993,450 lei), funded by the European Union, through the National Recovery and Resilience Program (PNRR) and carried out between May 23, 2023 and June 30, 2026. The main objective of this project is to provide a deeper understanding of how digital technologies can be integrated into business activities, identifying challenges and implementation-specific solutions that can contribute to strengthening the digitalization of enterprises in Eastern Europe.

The research project included in the analysis companies from the top 30 car manufacturers and top 100 car suppliers, only companies that had at least five years of publicly available annual reports for the period 2012-2022 were selected. In total, the UBB study included 495 annual reports published by 54 large companies in the global automotive industry. The research sample includes well-known brands in our region, such as Volkswagen AG, Toyota Motor Corp, Stellantis or the Mercedes Benz group.

The annual reports of these companies were the basis for calculating digitalization indices (Industry 3.0 and Industry 4.0), using text mining techniques, based on a machine learning algorithm, and on an analysis based on keywords. The financial indicators were extracted from the audited and public financial reports of these companies. Profitability was measured by the operating profit margin indicator (EBITDA margin), asset efficiency by the asset turnover rate (turnover/assets), and profitability by the return on equity rate (ROE).