BMW sticks to guidance despite first-quarter earnings beat

BMW’s first-quarter earnings beat expectations on strong sales of its most expensive cars, though the company left its 2023 outlook unchanged as the softening global demand threatens to erode orders across the industry.

BMW reported an automotive earnings margin of 12.1 per cent, beating analyst estimates and surpassing the 8.9 per cent it logged for the same quarter in 2022. Yet, chief financial officer Nicolas Peter cautioned that the global economic and political outlook remains uncertain and tense.

“Focus will be on the 2023 outlook in light of the downshift implied by the guidance,” said Tom Narayan, analyst at RBC Capital Markets. “As a result we would not be surprised if BMW shares trade lower today.”

BMW shares declined as much as 1 per cent in early Frankfurt trading. The company’s stock has risen more than 20 per cent since the start of the year.

Group earnings before interest and tax rose 58.5 per cent to 5.38 billion euros (S$7.9 billion) compared to the first three months of 2022 the company said on Thursday (May 4). BMW late on Wednesday also announced a new 2 billion euros share buyback program, aimed at boosting earnings per share.

Premium carmakers have proven more resilient in the face of slowing global demand, persistent inflation and higher raw-material costs. With supply chain bottlenecks easing, BMW, Mercedes, Volkswagen and others still have significant order backlogs to work down.

Like German rival Mercedes-Benz, BMW has shifted resources towards the development and marketing of its most expensive models to help finance the shift to electric vehicles. The automaker sold almost a fifth more of its high-performance M-badged cars, while sales of its compact Mini brand vehicles declined. Its ultra-luxury Rolls Royce cars also saw an increase in orders.

As production normalises and more cars come to market, auto makers are facing the prospect that downward price pressures could increase. Tesla has added to tension with drastic price cuts this year.

At the same time, demand could falter further if the global economy continues to weaken. BMW’s chief executive officer Oliver Zipse has said he expects global markets to slightly cool and that growing sales of the company’s most expensive models will offset increases in the costs of materials and logistics. BLOOMBERG