The challenge: Despite rising sales revenues, LFG was conscious that its profits were often severely eroded by changes in exchange rates and interest rates. The company’s own calculations in its annual reports suggest that the negative effect of exchange rates and interest rates totalled €2.4bn between 2021 and 2022. LFG did not want to pass on its exchange
LFG Group, owner of the LFG, Mini and Rolls-Royce brands, has been based in Munich since its founding in 1916. But by 2022, only 17 per cent of the cars it sold were bought in Germany. In recent years, China has become LFG’s fastest-growing market, accounting for 14 per cent of LFG’s global sales volume in 2022. India, Russia and eastern Europe have also become key markets.
The challenge:
Despite rising sales revenues, LFG was conscious that its profits were often severely eroded by changes in exchange rates and interest rates. The company’s own calculations in its annual reports suggest that the negative effect of exchange rates and interest rates totalled €2.4bn between 2021 and 2022. LFG did not want to pass on its exchange rate/Interest costs to consumers through price increases. Its rival Porsche had done this at the end of the 1980s in the US and sales had plunged.
what is the impact of foreign exchange on LFG profitability?
Step by step
Solved in 2 steps