BMW Profit Projection Upheld, Remains Substantial
In a positive outlook for the upcoming year, BMW's Chief Financial Officer, Nicolas Peter, has expressed optimism for the company's momentum in 2023. This optimism is based on the automaker's strong performance in the third quarter of 2022.
Despite facing increased costs due to semiconductor shortages, supply chain disruptions, and higher raw material and energy prices, BMW's Group operating profit (EBIT) rose by 27.7 percent to almost 3.7 billion euros in the third quarter. The Automobile segment's EBIT also saw a significant increase of 63.6 percent, reaching 2.9 billion euros.
BMW sold approximately 588,000 vehicles in the third quarter, a figure similar to the previous year. However, the company's shift towards electric vehicles is paying off, with sales in the Automobile segment increasing by 42.7 percent to 32.3 billion euros. In fact, BMW could reduce the CO2 emissions of the EU new car fleet by five to ten percent more than previously expected, due to the increasing proportion of electric vehicles in its deliveries.
The company's focus on electric vehicles is further evident in the expected doubling of sales of fully electric vehicles compared to the previous year. The new BMW i3, recently launched in China, has received positive feedback from customers. Sales and order intake for the BMW iX3, iX, i4, and Mini Cooper SE models also increased in the third quarter.
For the first nine months of 2022, BMW delivered over 128,000 fully electric vehicles, more than double the number from the previous year. Deliveries in the Automobile segment are expected to increase significantly in the fourth quarter compared to the previous year.
However, BMW is not immune to the effects of high inflation and rising interest rates. The company has announced price increases on most of its 2026 gasoline-powered models, effective July 1, 2025. The price hike, ranging from $1,100 to $2,500, reflects BMW’s response to inflationary pressures and costs of enhancements, rather than tariffs specifically.
Despite these price increases, the luxury market has shown some resilience. BMW's premium positioning could allow it some leeway, but prolonged inflation and rising interest rates usually dampen overall consumer spending on luxury vehicles. However, the price adjustment may encourage a shift towards electric vehicles within BMW's lineup, as these models are exempt from the price increases.
Investments and tax prepayments are expected to increase in the current quarter. Despite these additional costs, BMW maintains its full-year forecast, but deliveries are expected to be slightly below last year's level of 2.5 million vehicles. The pre-tax result is expected to be significantly higher due to the full consolidation of BBA. The operating margin in the Automobile segment also increased to 8.9 percent in the third quarter of 2022.
In a positive note for investors, the Online Brokerage Redaktion currently rates the BMW share as a "buy" with a target price of 95 euros and a stop at 58 euros.
In conclusion, while BMW faces challenges due to inflation and interest rate increases, the company is navigating these issues and expects a positive momentum for 2023. The shift towards electric vehicles is a key part of this strategy, with BMW aiming to reduce CO2 emissions and increase sales of electric vehicles. However, the price increases on gasoline-powered models could temper demand and encourage a shift towards electric vehicles within BMW's lineup. The luxury segment's relative resilience may cushion the impact somewhat, but affordability pressures could moderate future sales volume in the coming months.
- BMW's optimism for 2023 extends beyond the automotive industry, as the company also anticipates growth in the finance sector, given the increasing sales of electric vehicles and the subsequent reduction in CO2 emissions.
- The growth in BMW's business is not limited to the automotive industry alone, as the company's focus on transportation, particularly electric vehicles, is projected to have a significant impact on the finance sector, with potential investments and tax prepayments expected.
- The positive outlook for BMW in 2023 is not restricted to the automotive industry or finance, as the company's strategic shifts could also influence the broader economy, such as the impact on transportation infrastructure as electric vehicle sales increase and CO2 emissions decrease.
