BMW Profits Boosted By Chinese Joint Venture And Higher Prices

On Thursday, BMW reported an increase in first-quarter profit, bolstered by a revaluation of the German carmaker’s investment in its Chinese joint venture and good pricing, and maintained its 2022 projection, despite unpredictable commodity and energy prices.

The automotive sector has been impacted by a global semiconductor chip shortage, but BMW says demand for its vehicles remains “extremely healthy.”

“Never before in the history of our company have our pre-orders been higher than they are today,” Chief Executive Oliver Zipse said on a conference call. “The markets signal that this high demand will continue.”

In early trading, BMW shares were up 1.9 per cent.

“We will still be dealing with an underlying scarcity throughout 2023,” Zipse said, adding that the company does not expect chip supplies to increase until at least the second half of 2022.

Despite a chip-fueled decrease in car sales, Stellantis, the world’s No. 4 automaker, reported stronger revenues on Thursday.

The chip shortage has forced carmakers, such as BMW, to concentrate on higher-margin automobiles. Prices have risen as a result of the limited availability, as wealthy automobile buyers can still afford to pay more.

However, for many ordinary people, new cars are beyond of reach. The average automobile transaction price in the United States, for example, was $44,129.

Used automobile prices have reflected the impact of this supply-constrained market.

According to online vehicle marketplace Auto Trader, April was the 25th consecutive month of year-on-year used car price growth in the United Kingdom, with prices up over 32 per cent.

“The cars they’re looking at are from what were previously lower priced ‘buckets’,” it added, however, as consumers’ budgets had not increased.

BMW reported a preliminary one-time profit of 7.7 billion euros ($8.2 billion) from the revaluation of its stock in its joint venture with Brilliance Auto Group.

 BMW said in February that it will pay 3.7 billion euros to increase its interest in the company from 50 per cent to 75 per cent after receiving the requisite Beijing licence.

The stake had complicated BMW’s performance, according to Jefferies analyst Philippe Houchois, “but these statistics look like a substantial beat.”

After adjusting for the share, BMW reported a 16.3 percent gain in revenue for the quarter, despite a 6.2 per cent reduction in car sales, thanks to increased pricing.

Strong vehicle pricing also helped BMW partially offset increased raw material and energy prices, which the firm expects to stay high.

 Despite the volatility, the automaker expects its automotive segment’s operating margin to be in the region of 7 per cent to 9 per cent.

The corporation had a net profit of 10.2 billion euros, up from 2.8 billion euros the previous year. BMW made an operational profit of 3.4 billion euros, up from 3 billion euros before the impact of the stake in its Chinese joint venture.

(Adapted from EconomoicTimes.com)

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