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BMW’s results offer potential bright spot for German car industry

BMW AG is optimistic about its luxury and fully electric vehicle sales in 2024, offering a rare positive outlook among German carmakers that have seen softening demand in China hurt their forecasts.

Speaking on an earnings call, chief executive Oliver Zipse said he was “not nervous” about a price war in China that is 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, Mr Zipse said he was confident about a good start in the coming year.

The German manufacturer 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 electric vehicles. 

BMW’s results offer a potential bright spot for Germany’s car industry, which is feeling the pressure of higher interest rates, weakening demand and persistent inflation. Mercedes-Benz reported last week a drop in margins, while Volkswagen said it was speeding up cost-saving efforts. 

The shares rose as much as 4% in the latest trading session at one stage and have risen more than 12% this year, while rival Mercedes has declined more than 5% and Volkswagen has fallen nearly 10% during the same period.

Order intake ‘very strong’

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 research note, adding the car maker cited a healthy order volume and a positive volume development. “We see no red flags raised.” 

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 electric vehicle 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 electric vehicle subsidies.

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 over 15%, the company said. BMW confirmed its guidance for the year. 

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

This article was originally published by a www.irishexaminer.com . Read the Original article here. .

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