Bmw: profit up 42 percent despite chip shortage

Carmaker BMW significantly increases profit – and pulls ahead of Mercedes in terms of unit sales

The author is an editor in the corporate department

The Munich-based group is pulling ahead of the competition. Source: Reuters

The Munich-based group pulls ahead of the competition.

Munich More luxury cars, fewer discounts: BMW presents strong third quarter results. The Bavarian Dax company posted a “new high” in sales and profits from July to September despite shrinking vehicle sales. In concrete terms, the Munich-based company increased its revenues by 4.5 percent year-on-year to 27.5 billion euros. Earnings before interest and taxes shot up from 1.9 to 2.9 billion euros. An increase of almost 50 percent.

On balance, BMW thus generated a consolidated net profit of almost 2.6 billion euros. This corresponds to an increase of around 42 percent compared with the third quarter of 2020. “The BMW Group shows how earning power and transformation go hand in hand. For us, technological change is a great opportunity to strengthen our business model in the long term,” rejoiced BMW CEO Oliver Zipse.

The manager wants to make BMW “future proof. In return, the share of purely electric models in total sales is expected to climb from around three percent at present to over 50 percent by the end of the decade. Zipse also wants to reduce the CO2 footprint of its vehicles by 40 percent by 2030 compared to 2019 levels, for example by drastically increasing the recycling rate. After all, sustainability goes far beyond the switch to electric drives, says Zipse.

At present, however, its group still earns most of its money from diesel and gasoline engines. After nine months of business, BMW nearly quintupled its net profit to 10.2 billion euros, thanks mainly to internal combustion engines. The return on sales in the dominant car division is thus a proud 11.3 percent. Even better: the segment’s free cash flow amounts to 6.3 billion euros. Nothing stands in the way of paying an adequate dividend to shareholders.

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At the core of BMW’s good results were a “better product mix” and “good price penetration,” the group said. In concrete terms, this means that BMW, like Daimler and other car companies, has recently channeled all available chips into the production of its particularly lucrative SUVs, heavy sedans and sports cars.

BMW gets off lightly

Sales of the luxury Rolls-Royce brand, for example, rose disproportionately by 63 percent to 4300 units. Sales of the tuning subsidiary BMW M GmbH also increased by 123% in September.000 units by well over one-fifth. Although sales are falling in other segments. But because new cars are in short supply, carmakers can push through higher prices, explains NordLB analyst Frank Schwope: “Artificial scarcity strengthens prices.”

Among the big three domestic car companies, BMW has so far coped best with the semiconductor crisis. In the third quarter, the Munich-based company suffered only a twelve percent drop in new car sales, while sales at archrival Mercedes-Benz slumped by almost a third and those at Volkswagen by a quarter.

After nine months of business, BMW has recorded sales of more than 1.93 million units, an increase of nearly 18 percent. By way of comparison, Mercedes sales recently stagnated at 1.6 million vehicles sold. This means that in 2021, for the first time in years, the Swabians are likely to deliver fewer cars than their Bavarian competitor. In other words, BMW is on the verge of replacing Mercedes as the world’s largest premium manufacturer.

In terms of earnings power, however, the brand with the three-pointed star is currently still slightly ahead. After three quarters, Daimler’s car division has posted a margin of 11.8 percent – half a percentage point higher than BMW’s. In historical terms, however, both premium manufacturers are shining with unprecedented earnings power.

BMW confirmed its annual targets, according to which the car margin should be up to 10.5 percent after twelve months. “We are on target for our full-year guidance and are looking ahead with confidence,” said CFO Nicolas Peter. However, the manager expects the bottleneck for microchips to continue in 2022. But the worst seems to be over.

Expert: Tesla will overtake BMW

Experts warn that BMW is more likely to face risks in the medium term anyway. “The market for battery-electric cars is developing much faster than some on the BMW board could have imagined. The focus has been on plug-ins and hybrid platforms for too long and the superior skateboard architectures have been pushed to the back of the queue,” criticizes Ferdinand Dudenhoffer. The head of the Center Automotive Research (CAR) assumes that the American electric car pioneer Tesla will overtake the Munich company in terms of sales figures before 2030.

For 2022 alone, Tesla has standard battery capacities ready for more than 1.5 million units, Dudenhoffer said. In addition, a Tesla order for iron phosphate cells from the Chinese supplier CATL is currently being discussed for a good 800.000 vehicles spoken. And then also soon the Tesla production starts in Grunheide near Berlin. “Time is running out for BMW,” believes Dudenhoffer.

The industry expert is convinced that BMW, like Mercedes, would have to move much more quickly to an all-electric fleet in order to stand up to attackers like Tesla, Lucid or Nio in the future. BMW boss Zipse, on the other hand, thinks little of prematurely abandoning the internal combustion engine. The hope that soon everyone in Germany and elsewhere will drive only electrically will “not be fulfilled,” the manager explained only recently in an interview with “Der Spiegel” magazine. The reason: “The charging infrastructure is not being expanded at the same rate as the product range for e-cars.”

In order to keep pace with the ramp-up of electric vehicles, the expansion of charging stations in Germany alone would have to be five times as fast as it is now. However, Zipse obviously does not believe that such an acceleration will occur.

And in many other EU countries, there is not even a rudimentary charging network suitable for everyday use. “Why should we prematurely commit ourselves to just one technical solution if this means that considerable potential remains untapped in the here and now?” asks Zipse.

The BMW boss believes that there is still a long way to go before all car drivers in all countries will only drive on electricity, and that nothing will be gained in terms of climate protection if electric cars are powered by coal. “We need competition between technologies – in the interest of customers and for less CO2,” stresses Zipse: “Anything else would be a consolidation course.”

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