Price increases improve BMW automobile sales. BMW (BMWG.DE) reported a higher earnings margin for its cars segment on Thursday, with a rise to 12.1% in the first quarter from 8.9% a year earlier, but kept its outlook unchanged in the face of ongoing high costs and rising competition.
The German automaker blamed the impact of last year’s full consolidation of its Chinese joint venture, BMW Brilliance Automotive, for a drop in group earnings before tax to 5.1 billion euros ($5.65 billion) from 12.2 billion.
“The geopolitical and economic situation remains volatile and tense.” In key markets, inflation and interest rates are both high. “The same holds true for material and commodity prices,” stated BMW Chief Financial Officer Nicolas Peter.
Sales fell 1.9% in Europe and 6.6% in China, owing to inflation and the effects of the coronavirus pandemic; an upward trend was visible in March and April, according to BMW.
It expects nominal growth in Europe, healthy sales in the United States, and a stabilizing Chinese economy.
In a report, Daniel Roeska of Bernstein Research noted that investors might wonder why BMW has not updated its projection because the vehicle’s margin is far over the 2023 expectation of 8-10%.
“BMW has a reputation for guiding extremely conservatively… the top question for most investors, as with peer Mercedes-Benz, will be whether a guidance raise is required later this year,” Roeska explained.
Mercedes-Benz (MBGn.DE), which topped quarterly profits predictions last week, said it now expects to meet the upper end of its vehicle margin target of 12-14% but did not raise it.
BMW’s financing and leasing business suffered in line with that of other carmakers like Porsche under persistently high-interest rates and price increases, with the volume of new business dropping 14% and earnings down 6.2%.
