How Is BMW Doing Financially?

BMW AG, a German automaker, reported on Thursday that its revenue and net profit both reached record highs in 2021 despite increasing investment on electric vehicle-related research and development.

BMW claimed its full-year net profit increased from just 3.86 billion euros in 2020 to 12.46 billion euros, or nearly $13.7 billion, in a sneak peek at the numbers it will reveal at its annual meeting the following week. Over the previous year, sales increased 12.4% to 111.24 billion euros, or around $122.4 billion.

Climbed sales of automobiles, SUVs, and motorcycles were the traditional means through which BMW’s annual revenue increased. In comparison to its coronavirus-hampered 2020 performance, the automaker’s vehicle deliveries, which include cars and SUVs, increased by 8.4% to little over 2.5 million vehicles. That occurred in spite of production hiccups brought on by a persistent global semiconductor chip shortage.

These “electrified” vehicles, which include plug-in hybrids or completely electric models, made for about 13% of the 2021 deliveries. Just over 328,000 electrified vehicle sales were made by the BMW Group in 2021, an increase of 70% from the year before but still well short of EV market leader Tesla’s 936,000 sales.

By 2030, BMW wants at least half of its global deliveries to be entirely electrified vehicles.

Costs are associated with the EV push. BMW increased its R&D spending by 10.7% to 6.3 billion euros, much of which was devoted to developing new EV designs and parts. However, when reported as a percentage of revenue, it was roughly in line with 2020 at 6.2%.

In spite of the chip shortage, BMW’s profitability increased as the business focused on producing its most lucrative car lines. This is encouraging news for investors anticipating that BMW will be able to afford the switch to zero-emission vehicles. Before the Covid-19 pandemic rocked the world’s sectors, the operational profit margin in BMW’s automotive business, a closely followed number among auto analysts, increased to a robust 10.3% in 2021 from just 2.7% in 2020 and 4.9% in 2019.

BMW motorcycle sales increased 14.8% in 2021 to little over 194,000 units. Operating profit margin for the motorbike division increased from 4.5% in 2020 to 8.3% in 2021.

According to Nicolas Peter, who works for BMW in a position akin to a chief financial officer for a U.S. company, “our business figures are proof that we were able to combine the underlying transformation and the significant investment it entails with strong operational success in a very volatile environment in 2021.” “We are hopeful about the future and at a good place.”

BMW intends to distribute a portion of that large profit to its stockholders. At the annual meeting next week, the firm said that it will propose a new share repurchase program as well as an increase in the annual dividend to 5.80 euros per share from 1.90 euros in 2020.

Separately, BMW disclosed on Thursday that it has reached an agreement to buy Alpina, the name of a long-standing manufacturer of higher-performance variations of BMW vehicles, some of which have occasionally been made available through BMW’s own dealership network. Like the AMG brand at rival Mercedes-Benz, the Alpina brand will eventually become an internal trim line for BMW.

BMW’s annual shareholders meeting, which starts on March 16, will provide a thorough report on the company’s fourth-quarter and full-year results.

Despite the chip crisis, BMW surprises investors with an increased profit forecast.

BMW startled investors when it announced it has increased its profit prediction for 2021 from its previous expectation of a 7 to 9% objective to between 9.5% and 10.5%, claiming improved sales of its high-margin vehicles more than made up for any issues with semiconductor supply.

In a research report, Bernstein Research analyst Arndt Ellinghorst stated that “BMW reaffirms that the company is well on pace to achieve excellent profitability for the second half of this year and more critically for 2022.”

“BMW raises the range of its forecast for the Automotive Segment’s EBIT (earnings before interest and taxes) margin from 7% to 9% to 9.5% to 10.5% for the fiscal year 2021. In addition, the range of expectations for Return on Equity for the Financial Services Segment is now between 20% and 23% rather than between 17% and 20% “The business declared in a statement.

BMW anticipates that the ongoing favorable pricing effects for both new and pre-owned vehicles will more than make up for these negative sales volume effects in the current financial year, according to the statement. “Whilst the semiconductor supply restrictions are expected to further impact production and deliveries to customers in the coming months,” it said.

BMW increased their profit expectation back in August from the initial 6% to 8% forecast to between 7% and 9%. Investors were concerned about its resolve to pursue an electric vehicle policy that also provides place for conventional internal combustion engines (ICE), presumably fuel cells, at the time, despite the company’s assertion that its bottom line outlook was positive.

BMW increases its 9.5% to 10.5% annual profit prediction due to rising costs. problems with cushion chips

In addition, the automaker increased its prediction for return on equity in the financial services section from 17% to 20% to 20%-23% and stated that it anticipates free cash flow in the automobile segment of about 6.5 billion euros.

BMW AG stated that it anticipates the ongoing favorable pricing effects for both new and used vehicles will more than make up for these negative sales volume effects in the current fiscal year. “Whilst the semiconductor supply restrictions are expected to further impact production and deliveries to customers in the coming months,” the company said.

Although chip shortages have dogged the auto sector for months, forcing firms like Toyota (7203.T) and Renault (RENA.PA) to warn of longer-term production losses, higher pricing have reportedly helped some to overcome their losses.

In August, Daimler AG (DAIGn.DE) acknowledged pricing impacts as the cause of better than anticipated Mercedes-Benz division profitability. Following good quarterly results, BMW also increased its profit outlook in August, but cautioned at the time that chip shortages might negatively impact the remainder of the year. View More

However, because of its close relationships with its suppliers, BMW was less impacted by the shortages than other automakers, many of which were compelled to permanently suspend production at some of their plants. View More

BMW Group’s global revenue from 2007 to 2021

The global revenue of the BMW Group was around 111.2 billion euros in 2021. The German automaker, which sells vehicles under the BMW, Rolls-Royce, and MINI brands, was one among the top luxury automobile manufacturers in the world in 2019. BMW rebounded rather fast from the 2008–2009 financial crisis, surpassing pre–crash revenue and EBIT by 2010.

With quarterly sales exceeding 93,033 units, BMW is presently the third best-selling European automaker in the United States. However, the MINI brand struggles to sell in the US, but MINI Cooper has done well to maintain its presence in the market, thanks in part to the Countryman model, which represented 40.2% of Mini’s sales in the US in 2018.

BMW has made bold goals to increase the sales of electric vehicles in only two years. If successful, this should enhance the company’s current 1% market share for electric passenger cars in Europe. The company’s MINI brand will soon be entirely electrified, and it may even have grandiose plans for totally electric, high-performance sports vehicles and motorcycles. In 2030, it is anticipated that there will be 127 million electric vehicles on the road worldwide.

Is BMW doing well financially?

In the three months from July to September 2021, the BMW Group continues to show off its high level of profitability, with third-quarter records for revenues, profit before taxes, and net profit. The Group’s impressive performance at this time was primarily fueled by favorable product mix elements, favorable pricing impacts for new cars, and consistent selling prices for used cars.

At the quarterly press conference, the BMW Group confirmed its outlook for the entire year in light of the nine-month period’s robust performance and the new records it set for customer deliveries, revenues, and profit before tax. The Group’s underlying profitability was amplified in an ad hoc release dated September 30 that raised the outlook for the current year.

The Group is steadfastly moving toward becoming a premium automaker that is climate neutral at the same time.

“The BMW Group is a perfect example of how profitability and change can coexist. We regard technological advancement as a fantastic chance to improve our business model over the long term. We are always moving the business forward to make it future-proof with our focus on climate-neutral mobility “Oliver Zipse, the chairman of the board of management at BMW AG, made this statement on Wednesday in Munich.

The introduction of the BMW I Vision Circular concept car at the IAA in Munich in September served as further evidence of the BMW Group’s ongoing commitment to sustainability, which will ultimately result in a circular economy. The BMW Group’s first totally recyclable and recycled vision vehicle offers a view of sustainable premium mobility in the year 2040.

“How large is a vehicle’s carbon footprint over the course of its full life cycle, taking into account the effects of raw materials, industrial production, active usage, and recycling, is the pertinent query in terms of climate protection. That is the measure of our performance and the currency that ultimately matters, “Zipse made a point. “Because of this, we understand sustainability in much more depth than just designing e-drive systems. In order to achieve the highest level of climate protection, we utilize circular economy principles, beginning with the ethical selection of specific raw materials for production and taking into account the whole life cycle of our cars.”

Is BMW having money problems?

The sanctions for conspiracy are seriously hampering BMW’s plans to dominate the luxury market.

In the past ten years, BMW hasn’t experienced a loss. Given the overall decline in auto sales, the automaker’s poor 2019 Q1 may not have come as a great surprise, but the decline in BMW’s trend line is far too severe to be explained by a slowing auto industry alone.

According to Bloomberg, BMW’s loss was mostly caused by having to set aside $1.6 billion as a legal provision to face fines from China and Europe as a result of the automaker’s alleged cooperation with rival German companies to postpone the introduction of new emissions equipment. But even if you disregard the substantial sum of money BMW had to set away, first-quarter earnings still decreased by 42%, or EUR1.1 billion ($1.23 billion).

The pricing competition BMW encountered in some regions and the expenditures it made in new technology during the first three months of 2019 are the causes of that decline. Although it’s unclear what those investments were used for, it’s understandable how cash resources may have been limited given the automaker’s commitment to collaborate with Daimler on autonomous technology and the influx of new models it recently released, including the X7, 8 Series, Z4, and upcoming 3 Series.

BMW unveiled a EUR12 billion ($13.4 billion) savings strategy that comprises reducing the number of models and speeding up the manufacture of new cars in order to return to profitability. But not all is hopeless, since the momentum BMW created through its investments may result in a surge of sales for the second half of 2019.

Nicolas Peter, chief financial officer at BMW, predicted that overall, the first half of the year will be “somewhat weaker.” Model changes that affect sales and drive up costs should be the cause of the anticipated loss in Q2 2019, but Peter stated that “We expect the second half-year to profit from the strong product momentum.”

Sales of the new 3 Series and the X7, the latter of which, according to BMW CEO Harald Krueger, is flying off dealer lots and above forecasts, will provide that impetus. If BMW can survive this difficult time, which could be made worse by escalating trade disputes between the US and China, it may be able to surpass Mercedes as the leading luxury automaker.