BMW's car business gets Q1 earnings boost from price hikes

BERLIN -- BMW AG reported a higher earnings margin for its cars segment, with a rise to 12.1 percent in the first quarter from 8.9 percent a year earlier.

BMW benefited from continued stable pricing for both new and used cars, it said in a statement on Thursday.

The automaker attributed a drop in first-quarter earnings before tax to 5.1 billion euros ($5.65 billion) from 12.2 billion last year to the impact of last year's full consolidation of its Chinese joint venture, BMW Brilliance Automotive.

The company kept its outlook unchanged in the face of ongoing high costs and rising competition.

"The geopolitical and macroeconomic situation remains unpredictable and tense. Inflation and interest rates in key markets are high. The same applies to material and commodity prices," BMW Chief Financial Officer Nicolas Peter said in the statement.

Sales were down 1.9 percent in Europe and 6.6 percent in China, attributed to inflation and the after-effects of the coronavirus pandemic -- but an upward trend was visible in March and April, BMW said.

The company continues to expect slight growth in Europe, robust sales in the U.S., and a stabilizing economy in China.

Premium automakers have proven more resilient in the face 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 ultraluxury Rolls Royce cars also saw an increase in orders.

As production normalizes and more cars come to market, automakers are facing the prospect that downward price pressures could increase. Tesla has added to tension with drastic price cuts this year.

Daniel Roeska of Bernstein Research wrote in a note that markets may question why BMW had not raised its outlook in light of the cars margin being well above the 2023 forecast of 8-10 percent.

"BMW has a reputation for guiding extremely conservatively ... the top question for most investors, as with peer Mercedes-Benz, will be whether a guidance raise needs to occur sometime later this year," Roeska said.

Mercedes-Benz, which last week beat quarterly earnings forecasts, said it now expected to hit the higher end of its cars margin forecast of 12-14 percent but did not raise it.

BMW's financing and leasing business suffered in line with that of other carmakers under persistently high interest rates and price increases, with the volume of new business dropping 14 percent and earnings down 6.2 percent.

Bloomberg contributed to this report