BMW's higher margin SUV sales help drive 33% profit rise in Q3

Frankfurt

BMW's third-quarter operating profit rose 33 per cent on stronger sales of sports utility vehicles (SUVs) as well as the absence of one-off factors which had depressed earnings a year earlier, the German luxury car maker said on Wednesday.

The Munich-based company said its earnings before interest and taxes (Ebit) rose to 2.29 billion euros (S$3.4 billion), up from 1.72 billion euros in the year-earlier quarter and ahead of the 2.16 billion euros forecast in a Refinitiv poll.

The operating margin at its automotive division rose to 6.6 per cent from 4.4 per cent in the year-earlier period, when new emissions rules led to heavy stockpiling and discounting by competitors and hit BMW's profit margin on luxury cars.

Sales of BMW's cars rose just 3.6 per cent in the quarter, but shifted from sedans to SUVs, including its higher-margin X3 and X4 models, it said.

"We are performing at a high level in comparison with our competitors and considering the difficult conditions our business is facing," chief financial officer Nicolas Peter said in a statement.

Chief executive Oliver Zipse said BMW was "well on our way to reaching our targets for the year as a whole". But bosses' objectives call for pre-tax profit to fall "significantly below" 2018's level over the full year.

BMW reiterated it expects a significant fall in group pre-tax profit, a slight increase in vehicle deliveries, and an Ebit margin of between 4.5 per cent and 6.5 per cent in the automotive division as it prepares to roll out electric cars.

It sees demand for electrified vehicles, which includes hybrid engines, doubling by 2021, and sees sales of electrified cars growing by 30 per cent annually between 2021 and 2025.

The carmaker faces higher manufacturing costs as it prepares factories to build hybrid and electric cars, forcing it to cut costs elsewhere, with the aim of achieving more than 12 billion euros in efficiency gains by the end of 2022.

BMW said it will cut development times of vehicles by a third, and reduce the number of drivetrains by 50 per cent from 2021 onwards. REUTERS, AFP