BMW AG’s first-quarter earnings rose as strong sales of its most expensive cars offset weakening demand for entry-level models, especially in Europe.
(Bloomberg) — BMW AG’s first-quarter earnings rose as strong sales of its most expensive cars offset weakening demand for entry-level models, especially in Europe.
Group earnings before interest and tax rose 58.5% to €5.38 billion ($5.96 billion) compared to the first three months of 2022, the company said Thursday. BMW late Wednesday also announced a new €2 billion share buyback program, aimed at boosting earnings per share.
Premium carmakers have proven more resistent to the impact 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 toward 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.
The shift is boosting profitability. BMW reported an automotive earnings margin of 12.1%, beating analyst estimates and surpassing the 8.9% it reported for the same quarter in 2022. Yet, BMW left its 2023 guidance unchanged, and Chief Financial Officer Nicolas Peter cautioned that the global economic and political outlook remains uncertain and tense.
As production normalizes and more cars come to market, auto makers are facing the prospect that downward price pressures could increase. Tesla Inc. 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.
(Updates with additional details beginning in fourth paragraph.)
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