The German car manufacturers BMW and VW got off to a good start in the new year. Nevertheless, the growing competition from Chinese car brands is causing concern for German manufacturers.
The car manufacturers BMW and VW achieved surprisingly good results in the first quarter, the companies announced on Thursday.
BMW: High demand for luxury and electric models
Thanks to the full inclusion of the China business, BMW has achieved a significant increase in sales. The persistently high prices for new and used cars also had a positive effect on the Munich group, even if fewer cars were delivered than in the previous year.
Revenues increased by 18.3 percent to 36.9 billion euros in the first quarter, as the carmaker announced. The operating performance was also convincing, in particular due to the high demand for top models and electric cars. The profit margin in the core business with cars improved to 12.1 percent after 8.9 percent in the previous year and was thus above the company’s own target of eight to ten percent.
Despite the good performance at the beginning of the year, CFO Nicolas Peter is sticking to the operating margin in the car business originally planned for 2023: this should be eight to ten percent for the year as a whole. “The geopolitical and macroeconomic situation remains tense,” said Peter. The company expects competition in China, the most important market, to intensify once the Covid pandemic has subsided.
The bottom line for the Munich company was a significant drop in profits of almost two thirds to 3.66 billion euros because a one-off valuation effect due to the takeover in China last year was eliminated.
VW increases operating profit by a third
VW also got off to a robust start in the year: Germany’s largest car manufacturer was able to increase its sales by 22 percent to 76 billion euros in the first quarter. Adjusted operating profit rose sharply by 35 percent to 7.1 billion euros. The bottom line was 4.7 billion euros because VW had to deduct special effects from hedging against the rise in raw material prices. However, analysts had expected a larger crash here.
As the company reported on Thursday, the situation has stabilized somewhat despite persistent delivery problems in the automotive electronics sector. Sales recovered in Europe and North America in particular, while the Volkswagen Group had significant problems in China.
CFO Arno Antlitz nevertheless spoke of a “promising start to the 2023 financial year”. He said: “We are preparing for strong competition. But we also expect a strong second quarter.” Antlitz indicated that it would be difficult to add high subcontracting expenses to the finished cars. VW must therefore keep an eye on labor costs and productivity.
ifo survey: Subdued expectations in the German auto industry
However, the good results are not untroubled: According to a recent ifo survey, expectations in the German automotive industry are subdued. The corresponding barometer rose only slightly to 2.2 points, after 1.2 points in March, as the Munich ifo Institute announced in its monthly survey.
Ifo expert Oliver Falck explained with regard to the survey results: “The auto show in Shanghai in April made it clear to the German automotive industry that the competition in the new electromobility world on the Chinese market, which is so important for German car manufacturers, is also getting tougher becomes.”
Chinese competition is affecting German car manufacturers
Together, the German manufacturers sold just under five percent of all fully and partially electric cars in China last year – the local competition, on the other hand, sold 76 percent. According to expert estimates, Chinese brands will also have pushed foreigners’ market share below 50 percent by the middle of the decade in the overall market, including combustion engines.
One success factor here is the lower cost of e-cars, said Thomas Luk, car expert and partner at the management consultancy Kearney. “They manage to democratize premium products and offer high-performance products at affordable prices.” There is a lot at stake for Volkswagen, Mercedes-Benz and BMW: They sell around one in three cars in the world’s largest market.
The Chinese electric car manufacturer BYD was able to replace the core brand VW as market leader in its home market in the first quarter.
With information from Emal Atif, tagesschau.de