BMW lowers its sales target for this year due to lack of demand in China

BMW's results announcement reflects an increase in profits of 73.6% in the first half of the year, to 13,232 million euros, but the fact that the German company has added to this good figure a reduction in its forecast for sales for this year has caused a sharp drop in its shares on the stock market. The weakness of demand in China, one of its main markets, has resulted in the need to recalculate the data for 2022.

The second quarter results of the high-end German car manufacturer have exceeded analysts' forecasts "thanks to the good evolution of sales in Automobiles (74%) due to the higher price and despite the negative accounting effects derived from the consolidation of the Chinese joint venture'. But the expected slowdown in the second half forces a drop in its target for car deliveries to a level »slightly below 2021« from its previous target of matching last year's deliveries.

Unit sales fell 19.8% to 563,187 deliveries, while revenue rose 21.6% to 34.77 billion. EBIT fell 31.5% to €3,185 million due to the consolidation of BMW Brilliance Automotive (BBA) and net profit fell 36.4% to €3,047 million. The price increases allow to record an increase in income despite the drop in vehicle sales, a direct consequence of the restrictions in China and the continuous interruptions in the supply chain.

Regarding the rest of the figures, the margin of the BMW Group between January and June reached 24.5%, while in the same period of the previous year it stood at 17.6%. In the second quarter, the margin of the consortium reached 11.3%, while in the same period of the previous year it was 20.9%. The free cash flow of the Automotive Segment reached 7,770 million euros in the first half, 58.5% more than the 4,902 million reached in the same period of the previous year. All this for the acquisition of liquid funds from BBA, less the purchase price transferred in February, contributed 5,011 million euros.

Turnover in the first half of the year increased by 19.1% year-on-year, reaching 65,912 million euros, compared to 55,360 million euros in the same period of the previous year. In addition, the group's sales between January and June stood at 1,160,094 units, 13.4% less year-on-year due to bottlenecks and interruptions in the supply chain.

In the case of the BMW brand, deliveries in the first half of the year fell by 13.7% year-on-year, to 1,016,228 units, while Mini reduced its deliveries by 10.9% in the first six months of the year, up to 140,675 units. Rolls-Royce, for its part, increased its deliveries between January and June by 6.8%, to 3,191 units. In addition, motorcycle deliveries in the first half of the year fell by 0.1% year-on-year to 107,555 units.

In the first half of 2022, the BMW Group was able to more than double its sales of pure electric vehicles to 75,890 units, while in the second quarter deliveries increased by 85.2% year-on-year to 40,601 units. The deterioration of the situation, however, is clearly perceived already between April and June, deliveries of the BMW brand fell by 19.6% year-on-year to 496,432 units, while those of the Mini fell by 21.6% to 65,188 . Rolls-Royce also had declines in deliveries, down 2.6% and a total of 1,567 vehicles sold. The motorcycle division had a drop in sales in the second quarter of 7.5%, to 60,152 units.

Oliver Zipse, CEO of the BMW Group, explained: “Especially in unfavorable conditions, the BMW Group is characterized by a high degree of resilience. The company recognizes changes in the economic environment at an early stage and counteracts them accordingly.” “Our high degree of flexibility and operational performance have proven time and time again to be an effective combination in ensuring the successful course of the BMW Group, even in troubled waters. This strength will be important again now, as we see a headwind ahead of the economy, in addition to the current shortage of supplies », he defended during the presentation.

In view of the strong demand for fully electric vehicles, the BMW Group will increase its investments in electromobility from the second half of the year. In addition, the company expects a slight drop in deliveries for the full year. This will only be partially offset by positive pricing and product mix effects, as well as developments in the used car markets. Consequently, its objective is that the free cash flow in the automotive segment for the whole year is at least 10,000 million euros.

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