AUTOMOTIVE STUDY 2025 / Šaroch (ed.) et al.

Economic value added for each country is rst subjected to an analysis of similarities and di erences in the main parameters of the value spread (i.e., ROCE and WACC) among the V4 countries and Germany. Hierarchical clustering is used here. Ward’s method was chosen for clustering, which minimizes the overall variability within clusters. e graphical output of hierarchical clustering is presented as a dendrogram, which was created using the SciPy library in the Python programming language and visualized using the Matplotlib library. e images were created using the Copilot assistant As part of the interpretation of the results, the subsequent analysis examines in more detail whether individual V4 countries achieve higher or lower ROCE and WACC and how these di erences change over the period under review. In order to investigate the reasons for the di erences in EVA creation across countries, the EVA calculation is decomposed using a value spread on individual generators. For the purposes of the analysis in this chapter, six key generators have been identi ed to understand the management areas in which nancial performance di ers across countries in the automotive industry. e generators in question are highlighted in red in Figure 4.1 below. e operating pro t margin re ects the amount of after-tax operating pro t (EBIT after tax), commonly referred to as NOPAT, generated per unit of realized production (sales). e operating pro t margin is a re ection of the success of production in the market and its cost structure. In addition to the operating pro t margin, the return on invested capital is also shaped by the turnover of invested capital (the volume of sales generated per unit of interest-bearing debt and equity invested in xed assets and the net working capital), which is determined by the dynamics (growth rate) of investment and the ability of the enterprise to translate this dynamics into the volume of output. e dynamics of investment (or its growth rate) is re ected in the value of invested capital. Its e ect can be negative if the return on invested capital does not exceed the WACC. is is determined not only by the cost of debt (after taking into account the interest tax shield), but also, of course, by the cost of equity, which increases with a higher proportion of interest-bearing liabilities in the capital structure due to the rising nancial risk. e e ect of the leverage of invested capital on EVA is negative when the cost of nancial distress, incorporated into the model through levered beta, outweighs the positive e ect of the after-tax cost of debt, which is generally lower than the cost of equity.

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