BMW Q2 results: three quarters of unit sales growth were from China!
What was that supposed Chinese curse – “May your wishes come true”?
Well for foreign auto manufacturers dreaming of rising Chinese sales to offset withering Latin American demand and possible interest rate rises this may not have seemed much like a curse. Without China, BMW’s Q2 unit deliveries would have been up by a meagre +1.4%, notwithstanding the 16 model launches and previous year’s heavy investments. The silver lining however has a black cloud. I’m not just referring to the increased reliance on a possibly slowing market, but the changing relationship between buyer and seller that inevitably arises as markets mature. Welcome to the world of the commercial shake-down. The US has been at it for a long timeÂ and with some spectacular foreign scalps taken recently such as the $9bn ‘settlement’ from BNP.Â The Chinese however, seem to be learning fast as seen by some recent headlines from their “National Development and Reform Commission (NDRC). Having worked over a few big names in other sectors, the NDRC are now taking some pot-shots at the Auto segment with their anti-monopoly laws and are threatening to punish Audi and Chrysler.
Will it change the game? No, Auto manufacturers can’t afford to be out of this market, but it will raise the cost of doing business there.
Comment on BMW from the WYT growth rater service:-
BMW: Market leader in the premium car segment with higher NPD expenditure sustaining record unit sales, albeit with a lagged delivery into margins. With 16 new models and model revisions being launched into this year, 2014 was always going to be a strong performer, particularly for an auto manufacturer in the premium segment, where aspirational Chinese accounted for 75% of Q2â€™s +27k/+5.3% increased unit sales.Â As LatAm markets wither and Russian sanctions ratchet up however, this dependency on the Chinese buyer may not be entirely favourable. Not merely as Chinese growth levels off, but as Chinese authorities learn how to leverage market access into control and fees. If the US can charge/shake-down BNP for $9bn to retain access to its markets, then what price is access to Chinese consumers worth â€“ see recent move against Audi (link below).
Trading â€“ Q2 FY14: Revenues +1.8%/+â‚¬353m (negative fx impact not disclosed) with EBIT +26%/+â‚¬537m on unit deliveries up +5.3%/+27k to 533k units and FTEâ€™s +5.3% to 112.5k. Within these figures, Auto revenues advance by +1.7%/+â‚¬303m with Auto EBIT recovering by +23%/+â‚¬ 406m to â‚¬2,161m after last year declines in higher R&D charges (not disclosed in Q2).Â By brand, BMW unit sales increased by 8.3% (to 458k units) with mini -10.4% (to 74k units) and Rolls Royce +28.6% (to 1.1k units). Motorcycles raised EBIT by +19.6%/+â‚¬9m to â‚¬55m on revenues +11.2%/+â‚¬53m while Financial services EBIT fell -1.9%/-â‚¬9m to â‚¬459m with group PBT rising +30.9% (to â‚¬2,660m) and EPS by +27.5% to â‚¬2.69.
OUTLOOK FY14:Â Sharp rise in global sales volumes expected (to >2m units) benefitting from 16 new models and model revisions.Â Auto EBIT margins are expected to be in 8-10% range (9.4% in FY13) and profits expected also to rise â€œsignificantlyâ€ albeit with the pace of EBIT growth expected to be â€œaffected by high levels of expenditure for new technologies and by rising personnel expensesâ€.