THE INFLUENCE OF THE GROWTH OF R & D EXPENSES ON RENTABILITY OF INVESTED CAPITAL IN AUTO-INDUSTRY

Abstract

The uncertainty and risk posed by new, more and more comprehensive technological changes threaten the ability of innovative and intensive industries to realize the grow of return on invested capital. Automotive industry, information and software companies and pharmaceutical companies are at the forefront of the investments in R&D expensive. This reflects on the increased prudence of investors and their turn to safest industries which offer more prospective opportunities for higher profits. Therefore, the aim of this paper was to point out on the example of car companies the importance of understanding the need to maximize return on invested capital. The research carried out was based on the assumption that the race for new innovative investments slows down the profitability of the auto industry. In order to prove this hypothesis, the paper analyzes how the growth of R & D costs in the five largest car companies is maintained on the movement of the rate of return on capital, and on other business performances.
The analysis included exclusively large car companies, that is, those that are the leader in the level of realized income, net profit, capital values and market prices. These companies are also leading the level of investment in research and development, which from the standpoint of the subject of this work contributed to the representativity of the research sample. The obtained results confirmed the initial hypothesis based on the assumption that a high level of R & D costs slows the profitability of the car company. This is verified by comparing the regression correlation values obtained between the observed research costs, as independent variables and the value of the realized income, gross margin, ebits margins, net margins and ROICs, as dependent variables
The obtained results showed that the high level of ultraviation in new technologies has a positive effect on the growth of revenues, gross profit, ebits and net margins in the auto industry, but slowing the growth of profitability of this significant economic branch. An additional analysis related to determining the impact of R & D costs on the movement the rates of return on invested capital in selected pharmaceutical and information companies, which are also characteristic of large R & D investments. This comparison has confirmed that the cost of research and development investment is the most burdensome for the auto industry, as the information sector and the pharmaceutical industry, despite large investments, have relatively high returns on invested capital.