Status: 03.11.2022 12:51 p.m
Despite rising energy costs, the world’s largest car companies raked in more profits in the third quarter. BMW and Stellantis achieved a high plus. But business expectations are deteriorating.
Good business with expensive models and the majority takeover of the Chinese joint venture BMW Brilliance Automotive (BBA) have given the carmaker BMW a jump in profits. The Mercedes-Benz rival earned almost 28 percent more than a year ago in the third quarter before interest and taxes, at almost 3.7 billion euros. In the automotive sector, the operating result rose by almost 64 percent to just under 2.9 billion euros.
But the carmaker is preparing for headwinds due to high inflation and rising interest rates. The general conditions for consumers deteriorated, which will influence consumer behavior in the coming months.
A “normalization of the above-average order backlog – especially in Europe” is expected. However, BMW is sticking to its forecast for the current year. “Overall, we also expect positive momentum for our company in 2023,” said CFO Nicolas Peter.
Despite the energy crisis, BMW expects a significant increase in deliveries by the end of the year after the number of cars sold in the first nine months was 9.5 percent lower than a year ago – for the year as a whole the number should be just under the previous year’s level . “Currently, the company does not expect that a lack of energy supply will affect production this year,” it said. However, energy and material costs are likely to remain high.
Revenues increase by a third in the third quarter
The automaker is benefiting from persistently high prices for new and used cars. Despite rising energy and material costs, BMW generated group sales of 37.2 billion euros in the summer quarter, a good third more than a year ago. The pre-tax profit improved by a fifth to 4.1 billion euros. Analysts polled by Refinitiv had forecast lower sales and earnings.
For the first nine months, revenues add up to a good 103 billion euros, which is around a quarter more than in the same period of 2021. Pre-tax profit rose by more than half to 20 billion euros. After the first nine months, the profit margin in the automotive sector was 8.7 percent, after 7.8 percent a year ago. For 2022, another seven to eight percent are planned.
Opel mother Stellantis also increases sales significantly
The easing shortage of semiconductors and higher sales prices have also given the automaker Stellantis a boost. Sales increased in the third quarter by 29 percent to around 42 billion euros. The supplier of brands such as Fiat, Chrysler, Peugeot, Citroen, Alfa Romeo and Jeep thus exceeded the average analyst estimate.
Sales increased year-on-year by 13 percent to almost 1.3 million cars. The Executive Board stuck to its forecast of a double-digit operating return for the year as a whole.
Like the competition, the group that emerged from the merger of Peugeot manufacturer PSA and Fiat Chrysler is initially benefiting from well-filled order books after global bottlenecks in electronic chips slowed down the entire automotive industry for a long time. The supply situation has recently improved somewhat. In the meantime, however, darker clouds are gathering in the economic sky at Stellantis in view of high inflation and rising interest rates, which should dampen consumer sentiment.
Expectations of the auto industry are darkening
The business expectations for the auto industry have deteriorated significantly within a month, as the Ifo Institute announced. The corresponding barometer value fell to minus 35.3 points in October, after minus 6.3 points in the previous month. “Car manufacturers and their suppliers are now also concerned about a drop in demand,” explained Ifo expert Oliver Falck.
Manufacturers’ orders (minus 26.2 points) and demand (minus 38.1 points) fell compared to September. The assessment of the current situation fell across the industry, but only from minus 5.1 to minus 5.7 points.
However, the manufacturers assessed the order backlog positively and intend to produce more in the coming months. “Collapsing demand and rising material and production costs worsen the earnings situation, even with increased sales prices,” explained Falck. According to Ifo, the suppliers already want to produce less.
According to a survey by the Association of German Chambers of Industry and Commerce (DIHK), 16 percent of companies in the automotive industry are reducing their production. About 17 percent of car companies plan to relocate production abroad due to high energy prices.