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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 Friday on an earnings call, Chief Executive Officer Oliver Zipse said he’s “not nervous” about a price war in China that’s 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, Zipse said he’s confident about a good start in the coming year.
The German manufacturer earlier Friday 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 EVs.
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 Group AG reported last week a drop in margins, while Volkswagen AG said it is speeding up cost-saving efforts.
Shares rose as much as 3.9%. BMW’s stock has risen more than 12% this year, while rival Mercedes has declined more than 5% and Volkswagen has fallen nearly 10% during the same period.
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 note, adding that the carmaker 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 EV 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 EV 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 15.1%, the company said. BMW confirmed its guidance for the year.
BMW is increasing investment to speed up its EV rollout. With all its EV variants currently turning in a profit, BMW expects EV margins to increase with the recent introduction of fully electric 7-series and 5-series cars.
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