Automotive News at Bloomberg

BMW Offers Rare Glimpse of Optimism for 2024 Sales - Bloomberg

  • CEO says price war in China not harming BMW at this point
  • Solid order book indicates strong start to 2024, CEO says

Speaking Friday on an earnings call, Chief Executive Officer Oliver Zipse said he’s “not nervous” about a price war in China that’s so far mainly hitting mass-market producers rather than the luxury segment. BMW has no interest in lowering prices of its EVs as competitors have, he added.

Given the order book, Zipse said he’s confident about a good start in the coming year.

The German manufacturer earlier Friday reported a margin of 9.8% in the third quarter for its luxury car business, exceeding analyst expectations. Sales of premium vehicles rose, as did the proportion of total orders made up by EVs.

Shares rose as much as 3.9%. BMW’s stock has risen more than 12% this year, while rival Mercedes has declined more than 5% and Volkswagen has fallen nearly 10% during the same period.

Chief Financial Officer Walter Mertl said orders of new models like the 5 Series are giving BMW momentum with a backlog reaching into the first quarter of 2024. Order intake is “very strong,” he said, enabling BMW to maintain higher prices.

“BMW remains refreshingly confident in its near-term performance,” Bernstein analyst Daniel Roeska said in a note, adding that the carmaker cited a healthy order volume and a positive volume development. “We see no red flags raised.”

What Bloomberg Intelligence says: “BMW’s 3% better-than-expected 3Q earnings are in contrast to German peers, with good-quality results underpinned by €2.6 billion of free cash that should result in a modest uplift to full-year and 2024 consensus earnings. Importantly, the 3Q auto margin of 9.8% (underlying 10.8%) was despite an increased mx of BEVs (15% in the quarter vs. 12% in 1H) and against a backdrop of fierce price competition in China. This bodes well for 2024 earnings as BMW rolls out new iX1 and i5 BEVs over the coming months.”
— Michael Dean, BI automotive analyst

As supply constraints for components eased, BMW’s deliveries in Europe increased 12.4% in the third quarter, while US sales rose 7.6% compared to last year.

But deliveries in China, the most important market for Germany’s luxury carmakers, decreased by 1.8%. Demand there is slowing and local manufacturers are increasingly dominating EV sales. In addition, sales of BMW’s most expensive models could be at risk if Beijing retaliates against the European Union’s investigation into Chinese EV subsidies.

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BMW saw sales of premium vehicles rise 5.8% to 621,699 in the third quarter from the year before. The percentage of sales made up by fully electric cars rose to 15.1%, the company said. BMW confirmed its guidance for the year.

BMW is increasing investment to speed up its EV rollout. With all its EV variants currently turning in a profit, BMW expects EV margins to increase with the recent introduction of fully electric 7-series and 5-series cars.

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