Now that we've completed our roundup of all the U.S.-based manufacturer warranty expense data, it's time to turn to some of the international companies that also report their claims and accrual data in their annual reports.

Every year since 2003, we have collected three essential warranty metrics from the annual reports of each of the automakers: the amount of claims they paid, the amount of warranty accruals they made, and the amount of warranty reserves they kept at the end of each year. We also collect two sales metrics: the amount of automobile product revenue they reported, and the number of vehicles they sold.

Using claims, accrual, vehicle unit sales, and product sales revenue data, we also calculated three additional metrics: claims as a percentage of sales revenue (the claims rate), accruals as a percentage of revenue (the accrual rate), and accruals made per vehicle sold (accruals divided by unit sales).

The seven manufacturers we are looking at in this report are: Volkswagen AG, Stellantis N.V., Mercedes-Benz Group AG, BMW AG, Renault S.A., Ferrari S.p.A., and Volvo Car AB. All but Volvo report their annual expenses in euro; Volvo, headquartered in Gothenburg, reports in Swedish kronor.

History, Mergers, and Rebranding

Volkswagen AG is not just the world's largest passenger car manufacturer; it's also the largest warranty provider. VW owns the Volkswagen, Audi, Porsche, Lamborghini, Bentley, SEAT, and Škoda car brands, and also manufactures heavy commercial vehicles under the banner of Traton SE, which includes the Navistar brand. Volkswagen was founded by the Nazi Party in 1937, with the help of inventor Ferdinand Porsche, who founded the eponymous brand of sports cars, and designed the VW Beetle, the Tiger I and II heavy tanks, and the Elefant tank destroyer. Volkswagen more recently faced scrutiny as a result of its diesel emissions warranty scandal, which broke back in 2015.

Some of the other European auto manufacturers have restructured in recent years to compete with Volkswagen's superior market share, both within Europe and globally. This includes the merger of Fiat Chrysler Automobiles N.V. (FCA) and PSA Peugeot Citroën to form Stellantis N.V., finalized at the beginning of 2021. FCA, which owned the Fiat, Alfa Romeo, Maserati, and Lancia brands, purchased the American Chrysler Group in 2014, adding the brands Chrysler, Dodge, RAM, and Jeep to its portfolio. PSA contributed the Peugeot, Citroën, Opel, and Vauxhall brands to the merger. Stellantis is headquartered in Amsterdam, Netherlands.

Fiat started out as F.I.A.T. - the Fabbrica Italiana Automobili Torino, which translates to the Italian Automobile Factory of Turin. The company also made aircraft engines in its early years, and later made military machinery and vehicles for the Italian and German armies during World War II.

In the midst of restructuring that took place in advance of the Stellantis merger, FCA spun off Ferrari S.p.A. in 2016. Ferrari began reporting its warranty expenses in 2019, so this is the luxury automaker's debut appearance in this report.

Mercedes-Benz Group AG also recently restructured and changed its name. In early 2022, the company, most recently named Daimler AG, spun off its commercial vehicle business as an independent company, called Daimler Truck Holding AG. Mercedes-Benz Group still owns 35% of Daimler Truck, but the two are now functioning and trading in the stock market as separate entities.

The two were together for nearly 100 years, since Benz & Cie. merged with Daimler-Motoren-Gesellschaft amidst the economic crisis in post-World War I Germany, to form Daimler-Benz, the name by which the company was known until 1998. While the Mercedes-Benz line of cars was the company's most popular offering, it also created engines for German aircrafts, tanks, and submarines during World War II. In 1998, Daimler-Benz acquired Chrysler and renamed itself DamilerChrysler, but the company divested that asset in 2007.

Bayerische Motoren Werke AG, more commonly known as BMW, is the third-largest German automaker. The company started out as a maker of aircraft engines, and also started making automobiles and motorcycles during the interwar period. Like Volkswagen and Mercedes-Benz, BMW manufactured military equipment for the German army during World War II using labor from concentration camps. BMW purchased the Mini and Rolls-Royce brands during the early 2000s.

Renault S.A., which is based in France, makes cars, vans, and trucks. Renault entered into an alliance with the Japanese Nissan Motor Co. in 1999, and Mitsubishi Motors Corp. joined the venture in 2017. While the three remain separate companies, they each own a partial voting stake in other two, though the power dynamics are not exactly egalitarian. It seems that the alliance is currently in the process of restructuring these ownership stakes.

Our final company in this report is Volvo Car AB. Volvo Car is not to be confused with AB Volvo, the original parent company, which now primarily makes trucks and heavy equipment. In 1999, AB Volvo sold its passenger car division, Volvo Cars, to Ford Motor Co. In 2010, Ford sold Volvo Car to the Chinese Geely Holding Group, the parent of the manufacturer Geely Automobile. Since Volvo Car is still separately headquartered in Sweden, and reports its own individual warranty expenses in its annual reports, it is included in this report despite not being independently owned.

So our second- and third-largest players, Stellantis and Mercedes-Benz, have undergone significant restructuring in the past couple of years, with name changes to reflect this. Despite this, Volkswagen remains the largest by far in terms of its annual warranty expenses and overall revenue. BMW and Renault round out the front of the pack; both made some big growth moves in the early 2000s, but have not taken much action in recent years.

Volvo Car reports its warranty expenses in Swedish kronor, while the six others report in euro. Volvo doesn't have high enough warranty expenses for it to make sense to convert these data to euro; we would just be charting the changes in exchange rate between the two currencies. Like Volvo, Ferrari has low enough total annual warranty expenses that it wouldn't even show up on a chart in comparison to the other five. So these two are not included in the visualizations of total warranty expenses in Figures 1, 3, and 6, but are included in the expense rate percentages in Figures 2 and 4.

Warranty Claims Totals

The only company of the five in Figure 1 that saw warranty claims costs grow in 2022 was Stellantis, which is to be expected directly following a big merger. Volkswagen's warranty claims costs have been falling in recent years, and were significantly lower during this five-year period than they were beforehand, due to heightened costs in the wake of the diesel emissions scandal.

Volkswagen paid €9.00 billion in claims in 2022, a -3% drop from the year prior. Claims totals for the company dropped by about -3% from 2020 to 2021 as well. VW's warranty claims payments peaked in 2017, two years after the world found out that the company had programmed its diesel-powered cars to produce false emissions test results in order to meet environmental standards. From 2017 to 2018, the company's claims total dropped by around 40%, and we can see in Figure 1 that claims payments have stabilized around €9 billion per year since then.

Stellantis paid €4.09 billion in claims in 2022, up 30%, or a little less than €1 billion, in just a year. This jump isn't the result of a product failure, but rather the merger of FCA and PSA.

Mercedes-Benz saw its claims total drop by -14%, from €3.84 billion in 2021 to €3.32 billion in 2022. The manufacturer saw its accruals and total sales revenue drop by similar percentages, so expenses remain proportional.

BMW paid €2.18 billion in claims in 2022, down by just -2% from the year prior. Renault paid €546 million in claims. Renault has paid just about the same amount of claims each year for the past five years, with the exception of the pandemic year 2020, when totals were a little bit lower. Ferrari, on a scale too small to be seen in Figure 1, paid just €40 million in claims in 2022.

Volvo Cars paid SEK 6.92 billion in claims in 2022, which as of this article's publish date is equal to approximately €580 million. In terms of the scale of its warranty business, Volvo is paying around the same amount of claims as Renault, but much less than Stellantis or any of our three German manufacturers.

Warranty Claims Rates

Figure 2 shows the claims rates of all seven companies in this report. Since the claims rate compares each manufacturer's claims total to its own product sales revenue, the size or currency of those expenses don't affect the metric.

Despite its claims total falling significantly since the diesel emission issues, Volkswagen still has the highest warranty claims rate of the bunch. Volkswagen's claims rate in 2022 was 3.88%. The company's claims rate was nearly 9% in 2017, meaning that the company spent a relatively huge portion of its sales revenue on warranty claims during that year. The claims rate has clearly fallen in recent years, and is continuing to trend downward, though lower-than-usual revenue during pandemic year 2020 interrupted this.

All six of the other companies in this report had claims rates below 3% in 2022, and all but Stellantis saw their claims rates drop from 2021 to 2022. Mercedes-Benz had a claims rate of 2.70% during 2022, consistent with the year prior. Volvo Cars had the next-highest claims rate of 2.44%. Volvo's claims rate was just under 2% in 2018, and 2022 was the first year that the company's claims rate dropped since then, after four years of increases. Stellantis had a claims rate of 2.36% in 2022, up a bit, again normal for a company that's just taken on a huge merger.

BMW saw a significant drop in its claims rate, from 2.44% in 2021 to just 1.72% in 2022. This was the first time in the last five years that the manufacturer's claims rate fell below 2%. While the claims total barely changed, as we saw in Figure 1, the company's product revenue jumped, meaning that claims were a smaller proportion of profits.

Renault and Ferrari have the lowest claims rates of the pack. Renault's claims rate has risen a bit in recent years. In 2018, its claims rate was 1.00%; in 2022, it was 1.27%. Ferrari has stayed consistent with its claims rate since it started reporting in 2019. In 2022, its claims rate was 0.89%.

Warranty Accrual Totals

The warranty accrual totals are slightly more salient for these manufacturers in the wake of a big global economic event like the pandemic. This is because companies don't have control over the amount they pay in claims, but actively choose the amount of warranty accruals they make. In theory, these totals are tied to product sales, since manufacturers are meant to put the same amount aside per vehicle sold. We will investigate the European carmakers' warranty accruals three different ways in Figures 3, 4, and 5. Figure 3 presents each company's total annual accruals.

Volkswagen put aside €11.53 billion for future warranty expenses during 2022, up 5% from the year prior. The gap between VW's claims and accruals was more than €1 billion during each of the past five years. As we will see in Figure 6, the company holds over €20 billion in its warranty reserve fund. The emissions scandal was likely the impetus for forming this extra-large cushion. It's also possible that the company is still over-estimating warranty costs per vehicle based on the costs it was experiencing around 2015-2017.

The diesel emissions troubles went way beyond just a recall. In essence, almost every diesel-powered passenger vehicle the manufacturer produced over a span of five years was eligible for a costly warranty claim, since the company violated its warranty guarantee that its vehicles fulfill the legal emissions requirements of its markets. Beyond that, it violated the implied warranty of merchantability, that the vehicle does what VW says it does, and nothing is wrong with it. And then, of course, there were a lot of fines. It's not surprising the company is still reeling. Even before this scandal, Volkswagen had the highest warranty costs among the European automakers, ever since Daimler (now Mercedes-Benz) sold Chrysler back in 2007. Now, however, those warranty costs are on a much larger scale. Total accruals among these five companies (or their predecessors) doubled from 2008 to 2018.

Stellantis accrued €4.88 billion in 2022, up 15% from the year prior. Again, we stress that this normal in the wake of a big merger. BMW, on the other hand, increased its total accruals by 40% to €3.82 billion. The company's total revenue increased by the same amount over the same period; as we will see in Figure 4, its accrual rate remained very consistent.

Mercedes-Benz dropped its accruals by -16% in 2022, to a total of €3.48 billion. This drop outpaced its drop in revenue a bit, showing some overall savings on warranty costs. Renault dropped its accruals by -18% to €469 million. However, its product revenue remained about the same, meaning that the company made strides in saving on warranty costs. In other words, Renault was accruing a lower proportion of its total revenue for future warranty expenses, meaning more revenue became profit.

Warranty Accrual Rates

We take a closer look at this relationship between total accruals and product sales revenue in Figure 4, which shows the accrual rates of these seven European auto manufacturers over the past five years.

The accrual rates of all but Ferrari dropped or stayed the same from 2021 to 2022. Ferrari's accrual rate increased from 1.20% to 1.36%, switching places with Renault. Renault's accrual rate dropped from 1.33% to 1.09%, meaning that the company only put aside around 1% of its total sales revenue for warranty accruals.

Compare that 1% to Volkswagen's 4.96% accrual rate in 2022. This was actually the first time in a decade that VW's accrual rate dipped below 5%. Since we started tracking these data in 2003, Volkswagen has had the highest accrual rate of the pack. Even before the diesel emissions issues, VW's accrual rate hovered between 5% and 6%. The percentage peaked at over 10% in 2015.

At the middle of the pack are Volvo Cars, BMW, Mercedes-Benz, and Stellantis, all between 2.5% and 3.5%. In 2022, Volvo's accrual rate was 3.31%, BMW's accrual rate was 3.01%, Mercedes-Benz' was 2.83%, and Stellantis' was 2.81%.

Accruals per Vehicle Sold

Our next metric, accruals per vehicle sold, provides a different view. Of course, VW is selling trucks in addition to cars, while BMW is selling motorcycles. But while they do a wonderful job of segmenting their sales, they provide just one set of numbers for their warranty accruals. Some of these companies are also known for their expensive, luxary cars, while others have lower-cost options. These accrual rates are an average across all their product lines, not just passenger cars.

The bottom line is that their product mix doesn't change all that much from year to year, so therefore their accruals per vehicle also shouldn't change that much. But yet they do, as can be seen in Figure 5.

It makes sense that Ferrari has the highest accruals per vehicle sold by far, since its vehicles are very high luxury, with price tags to match. But what's really interesting is that Ferrari's average accruals per vehicle increased by two-thirds over the four years for which we have data. In 2022, Ferrari averaged €4,620 in accruals per vehicle sold, up 14% from the year prior. That number has increased by about two-thirds, or €1843 per vehicle, over just four years.

BMW had the next-highest accruals per vehicle sold in 2022, at €1,468. It's a little hard to see in Figure 5, but this was actually a 47% increase over just a year. As we mentioned earlier, BMW's product sales revenue was up by 40% from 2021 to 2022, explaining the increase in total accruals but consistency of the accrual rate. So it's surprising to see the proportion of accruals per vehicle sold impacted so much. Euro inflation and higher vehicle and parts prices are likely at play here.

Mercedes-Benz accrued an average of €1,419 per vehicle sold, down just -6%. Volkswagen accrued about €1,359 per vehicle, up 6%; Stellantis accrued €835, up 29%; and Renault just €229 per vehicle, up 7%.

European Warranty Reserves

Our final warranty metric is the balance in the warranty reserve funds of each of the five companies at the end of each of the past five years.

On this measure, VW is far to the front. The company held €26.05 billion in warranty reserves at the end of 2022. Next on the list is Stellantis, which held €9.27 billion at the end of 2022.

BMW held €8.25 billion, a 25% increase. The company has been depositing a lot of extra money into its reserve account in the past five years. Revenue went up for the company last year, but total accruals and accruals per vehicle sold went up even more, so perhaps it's changing its approach to anticipating future warranty costs.

Mercedes-Benz had €6.58 billion in its warranty reserve fund at the end of 2022. Renault held €874 million, dipping back down below the €1 billion threshold. Ferrari held just €126 million in its reserves, despite its high accruals per vehicle sold. Finally, Volvo Cars held SEK 11.494 billion, a little bit less than roughly €1 billion.