BMW, Like Mercedes, Manages To Raise Profits While Sales Slide.
“the auto industry is currently divided between the likes of VW and supplier Hella who have been forced to make profit warnings, and the likes of BMW and Mercedes”
BMW pleased investors with a 50% increase in 3rd quarter profits and joined Mercedes in managing to increase earnings while sales slipped.
Many mass auto makers like Volkswagen saw sales slip during the quarter because disrupted semiconductor supply chains meant strong post coronavirus demand couldn’t be met. Profits for these big operators crumbled too. But manufacturers like BMW and Mercedes (and Tesla) were able to concentrate on selling high margin cars and SUVs. High demand meant little pressure to cut margins to encourage sales and overall profits were boosted.
BMW’s earnings before tax accelerated 50% to €2.9 billion ($3.4 billion) compared with the same period last year, while sales slid 12% to just under 600,000. Analysts projections averaged about €400 million below that.
Last week Mercedes reported a strong earnings improvement as sales fell 25%. VW’s profit fell as sales also declined.
BMW’s share price Wednesday rose 1.35% to €89.84 by midday in Europe while the Europe STOXX Auto 600 rose just 0.8%.
Last month BMW surprised investors with news it raised its profit forecast for 2021 to between 9.5% and 10.5% from its previous expectation of a 7 to 9% target, saying improved sales of its high-margin vehicles more than compensated for any semiconductor supply problems. Back in August, BMW raised its profit outlook to between 7% and 9% compared with the previous 6% to 8% forecast.
Frank Schwope, analyst with Norddeutsche Landesbank Girozentrale, said the auto industry is currently divided between the likes of VW and supplier Hella who have been forced to make profit warnings, and the likes of BMW and Mercedes.
“We are maintaining our successful business development. And we can therefore confirm our adjusted (profit) guidance for 2021. Our profitability is of extreme importance. In this way, we are laying the foundation for continued investment in relevant future areas of activity,” BMW said in a statement.