HomeArts & CultureBMW profits accelerate on 4×4 and big saloon sales

BMW profits accelerate on 4×4 and big saloon sales

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The German luxury car maker BMW saw its net profit rise by nearly a third in the first three months of the year as sales increased, helped by profitable 4x4s and the 7-Series large saloon.

The Munich-based firmr said Thursday that it made €2.15 billion (Dh8.62bn) in the first quarter, up 31 per cent on the €1.64bn in the year-earlier quarter.

Profits were also boosted by a one-time gain of €183 million from the increased value of its HERE mapping venture with Daimler and Audi after new investors joined the business.

Sales leaders included the X5 4×4; unit sales for the vehicle made in Spartanburg, South Carolina; were up 18 per cent while sales for the 7-Series rose 50 per cent. Generally 4x4s and larger cars bring higher profits per vehicle than more modest cars. Sales in China rose 12 per cent while the US saw a a rise of just 0.7 per cent.

One key earnings figure, operating profit margin for the automotive division, fell to 9 per cent from 9.4 per cent but remained within the company’s target range of 8 to 10 per cent. The figure reflects how profitable the company’s sales are, excluding financial items such as interest and taxes.

BMW’ doubled sales of electric models such as the i3 and i8 to almost 20,000 in the quarter. Although that is still only 3 per cent of the company’s sales, the chief executive Harald Krueger said the company was on course to sell more than 100,000 for the year.

The car maker also said it had made adequate risk provisions to cover a worldwide drop in used-car prices, while cautioning that it expects a slight decrease in return on equity from its financial services arm in 2017.

A decline in residual car values can hit profits from leasing contracts.

“As expected, used car prices worldwide, with the exception of Asia, decreased slightly, driven by seasonal factors,” said the chief financial officer Nicolas Peter.

“From today’s perspective, we are well protected against residual value and credit risks,” he said, adding this also applied to residual values of diesel vehicles.

BMW’s net credit loss ratio of 0.33 per cent in the first quarter remains broadly in line with last year’s low level, the company said.

The firm said it expects a slight decrease in return on equity in its financial services segment this year, although it will remain above its targeted 18 per cent level.

BMW said its financial services portfolio managed 4.8 million customer contracts, and that 49.2 per cent of BMW Group vehicles were sold using financing or leasing.

* Agencies

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