Strong electric vehicles sales and rising prices counteract lower deliveries at BMW

BMW profits have risen to €3.4bn ($3.9bn) in the third quarter of 2021, which is a 38% increase on the same period a year earlier and a 52% increase in 2019 before the coronavirus pandemic hit. Revenues at BMW increased by 4.5% to a total of €27bn ($30.8bn) for the quarter and its net profit amounted to €2.6bn ($3.0bn) vs a forecast of €2.4bn ($2.7bn).

According to the company’s finance chief Nicolas Peter, the bigger than expected profits are the result of the company focusing on more expensive cars and electric vehicles (EV).

BMW’s deliveries fell 12.2% in the third quarter due to semiconductor scarcity to just under 593,000 as it switched production to higher-margin cars such as the x7 sport utility vehicle. However, its revenues were still up by 4.5%, offset by higher prices. High demand meant little pressure to cut margins to encourage sales and overall profits were boosted.

Additionally, EVs and plug-in hybrid cars saw a significant boost, with sales in the nine months to September 2021 almost double last year’s levels at just under 232,000 vehicles. Looking ahead, BMW expects strong electric vehicles sales to carry into 2022, with orders for new electric cars, including the iX SUV and the i4 saloon, remaining strong.

Luxury producers are better equipped to fare global chip shortage

Globally, many mass automakers saw lower third-quarter sales in 2021, because disrupted semiconductor supply chains meant strong post coronavirus demand could not be met. A total of 10 million to 11 million fewer cars are expected to be produced worldwide this year because of the shortage. This also means lower profits for these car manufacturers.

However, luxury producers like BMW, which were able to raise prices to offset losses, fared better than others.

BMW expects to deliver up to 90,000 fewer cars in 2021 because of a lack of chips. Despite that, it reported an EBIT margin of 7.8% in the third quarter. BMW also maintained its full-year EBIT margin forecast of 9.5% to 10.5% for its automotive division, adding this goal would be achieved by slightly reducing the number of employees.

Similarly, another luxury carmaker Daimler reported its group net profit rising to €2.6bn ($3.0bn) in the third quarter of 2021, from €2.2bn ($2.5bn) in the same period last year. This increase came as sales of cars and vans slipped 25% to 577,848.

In comparison, Volkswagen’ operating profits from its collection of mass-market and premium brands fell 12% to €2.8bn ($3.2bn) in the third quarter, compared with the same period of 2020. The profit margin dropped to 4.9% from 5.4%. VW’s own name mass-market brand lost €184m ($209.8m) in the quarter, similar to VW’s other mass-market brands SEAT and Skoda.

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