The carmaker BMW increased its profits in the third quarter by 23 percent to 3.2 billion euros and is “looking forward to the coming months with confidence,” as CEO Oliver Zipse said on Thursday. The order books are still well filled. Despite high costs and falling orders, especially in Germany and England, BMW can “go into the new year with confidence,” said CFO Nicolas Peter.
Zipse accompanies Chancellor Olaf Scholz on his trip to China, by far the most important market for BMW and the other German car manufacturers. BMW is expanding its plants there, took over the majority in the Chinese joint venture BMW Brilliance Automotive (BBA) in February and is therefore heading for record results this year: After the first nine months, BMW has already booked a profit of 20.3 billion euros taxes, after 13.2 billion in the same period last year.
Shortage of semiconductors as a brake
With 588,000 cars delivered in the third quarter, BMW fell just short of the strong prior-year level. A shortage of semiconductors was still slowing down production, and in China every tenth BMW dealer was closed due to Corona – “but that will improve in the coming weeks,” said Peter. Thanks to high prices for new and used cars, a high proportion of expensive models and a weak euro, sales rose by 35 percent to 37.2 billion euros. The profit margin in the auto division improved to 8.9 percent and thus reached the upper end of the target corridor. Without the BBA consolidation effects, it would have been 10.1 percent.
“We expect significant sales growth in the fourth quarter,” said Peter. Inflation, rising interest rates and the looming recession in Germany and parts of Europe slowed down incoming orders here. “But the high order backlog will carry us well into 2023.” The USA and China are likely to develop better. The demand for electric cars is high and increasing. BMW’s growth momentum will continue, said the chief financial officer.
High prices still expected
Bad for car buyers, good for BMW: Peter expects prices to remain high and hardly any discounts in all major markets. Used cars should also achieve good residual values in 2023, because then fewer leasing returns would come onto the market due to the production gaps in the Corona years.
When it comes to financial services, the company is feeling headwind: in the third quarter, only 42 percent of new BMW cars were loan-financed or leased, down from 51 percent a year ago. At the same time, provisions for defaulting loans were increased, even if the actual loan loss ratio was still very low.
Positive prognosis
By the end of September, BMW had delivered “over 128,000 Stromers with growing demand”. Orders for the iX, iX3, i4 and Mini Cooper SE e-models have increased, and the high-volume iX1 and i7 are coming soon. With this and with the globally balanced positioning in Europe, America and Asia, BMW is optimistic: “Overall, we also expect positive momentum for our company in 2023,” said Peter. With regard to the gas and electricity supply, he does not expect any production interruptions in European plants this winter.
BMW has confirmed its forecast for the current year and expects sales to be slightly below the previous year’s level of 2.5 million cars. Due to the full consolidation of BBA, profit before taxes will be significantly higher than the previous year’s EUR 16.1 billion.
