Boosted by China, BMW’s Quarterly Profit Jumped

BMW has exceeded all expectations in the second quarter, taking advantage of the enthusiasm of Chinese wealthy classes for the new version of the 5 Series.

From April to June BMW’s operating profit jumped 83% in high-end cars market, approaching 2.41 billion euros and the operating margin has increased to 14.4%, up 4.8 percentage.

Margin, one of the most followed accounting tools to assess the luxury automotive industry, has surpassed the 12.8% forecast that anticipated a profit of 2.14 billion euros. The survey was carried out while BMW had already identified its own objectives.

Max Warburton, analyst at Bernstein, called the results “of quite exceptional.” BMW takes the third place in the world’s most profitable automakers, behind two of its competitors in the segment of premium vehicles, Porsche and Ferrari.

“For BMW analyst who has covered 11 years, it’s amazing to see the results of this progress. In the past, it would be unimaginable that this group can achieve such margins,” wrote Max Warburton.

HIGHER PRICES

By absorbing the production of models such as Series 7, high-end vehicles, drivers in China have allowed BMW to offer higher prices and be more strict in its offer discounts. “What the market underestimates is that Chinese demand has an impact on the pricing policy on a global scale.”said Georg Stürzer, an analyst at UniCredit.

CAUTION

BMW has gone to achieve a record year in terms of financial results, as its fellow competitors, Mercedes or Audi, the manufacturer does not pay the overly optimistic and warned it might not be able to hold this pace. The group preferred to keep its target operating margin of 8% to 10% in its automotive business.

As for the Chief Executive Norbert Reithofer, he told reporters that the market environment remains very volatile, in part because of sovereign debt crises in Europe and the United States. “There are concerns about the volume of debt of many countries,” he said.

Emerging markets, where demand continues unabated, are now the main drivers of luxury vehicles sector, unlike Europe where sales slip. In this context, China provides more attractive opportunities to German industry of luxury vehicles.

BMW and its competitors specialize in high end should continue to benefit from Chinese demand, in contrast to more manufacturers turned to the general public who may be affected by the measures in Beijing to avoid economic overheating.

“A new high-end market with about one million units and a growth of around 40% emerged, and even if the landing is difficult for the global economy, the market will not disappear,” predicted Georg Stürzer, d ‘UniCredit.