On a May morning in 2022, BMW told the world that its first quarter had been richer than its sales alone would suggest, lifted by an accounting revaluation of its Chinese joint venture with Brilliance Auto Group. The carmaker kept its annual outlook intact, even as the cost of energy and raw materials kept shifting beneath everyone's feet. Behind the headline lies a quieter truth of this period: a world short of semiconductor chips, where scarcity has pushed prices up and made a company earn more from fewer cars. The gain on paper may settle, but the question it leaves is whether that scarcity
BMW Q1 Profit Jumps on Chinese Joint Venture Revaluation and Strong Pricing
Fewer cars sold, more money earned
Mark
The profit looks huge, 10.2 billion euros against 2.8 billion. Is BMW really that much better off?
Mimi
Not in the way the headline suggests. Most of the jump is the 7.7 billion euro preliminary gain from revaluing its Brilliance joint venture stake, after it went from 50% to 75% for 3.7 billion euros.
Luke
And note the word preliminary. That 7.7 billion figure isn't final, so the net profit total carries that caveat too.
Mark
So what does the underlying business look like?
Mimi
Operating profit excluding the stake was 3.4 billion euros, up from 3 billion. Revenue rose 16.3% on the same basis.
Mark
Even though it sold fewer cars?
Mimi
Yes, car sales fell 6.2%. Higher pricing carried it, along with better income from vehicles coming off lease in the U.S. and Britain.
Luke
Worth saying what the reporting supports: BMW attributes this to pricing and tight supply. It doesn't tell us how much each factor contributed.
Mark
Jefferies called it a significant beat. Is that settled?
Mimi
That's one analyst's read, in a client note, and he also said the stake complicated the results.
Luke
Right. And the 7% to 9% automotive margin is management's expectation, not an outcome. The company itself says commodity and energy markets will stay tense.
Il Polso
- A one-off 7.7 billion euro revaluation of the Brilliance stake inflated headline profit, making the quarter harder to read at a glance.
- Car sales fell 6.2% as chip shortages and supply snarls kept factories from running at full pace.
- Higher prices, pushed up by scarcity, carried underlying operating profit from 3 billion to 3.4 billion euros.
- Commodity and energy markets remain tense, and BMW is steering toward a 7% to 9% automotive margin for 2022 by holding prices firm.
On a May morning in 2022, BMW told the world that its first quarter had been richer than its sales alone would suggest, lifted by an accounting revaluation of its Chinese joint venture with Brilliance Auto Group. The carmaker kept its annual outlook intact, even as the cost of energy and raw materials kept shifting beneath everyone's feet. Behind the headline lies a quieter truth of this period: a world short of semiconductor chips, where scarcity has pushed prices up and made a company earn more from fewer cars. The gain on paper may settle, but the question it leaves is whether that scarcity-fueled pricing can keep ahead of the rising costs of making things.
On Thursday, May 5, 2022, BMW reported a rise in first-quarter profit and kept its full-year outlook unchanged, even as commodity and energy prices swung without warning. The headline number, however, came from an accounting event rather than from showroom sales. BMW revalued its stake in its Chinese venture with Brilliance Auto Group, producing a preliminary profit of 7.7 billion euros. The revaluation followed a February deal in which BMW agreed to pay 3.7 billion euros to raise its holding from 50% to 75%, after securing a licence from Beijing.
With that one-off included, net profit reached 10.2 billion euros, compared with 2.8 billion a year earlier. Jefferies analyst Philippe Houchois noted that the stake complicated the picture, though the numbers still looked like a significant beat. Stripped of the joint venture, the core business still grew: revenue rose 16.3% even as car sales fell 6.2%, and operating profit reached 3.4 billion euros, up from 3 billion.
Higher prices explain much of that gap. Pandemic-era supply troubles, above all a global chip shortage, forced carmakers to concentrate on higher-margin models, and scarcity pushed up the price of new and used cars alike. BMW said the environment also lifted income from vehicles returning off lease, especially in the United States and Britain. Pricing cushioned part of the blow from rising raw material and energy costs, but the company expected no quick relief, describing commodity markets as likely to stay tense.
Still, BMW projected an automotive operating margin of 7% to 9% for 2022. CEO Oliver Zipse credited the group's strength and resilience in a challenging climate. The open questions are whether pricing can keep outrunning input costs, and how the larger Chinese stake will look once the preliminary figure is settled and the underlying operations stand on their own.
On Thursday, May 5, 2022, BMW reported a rise in first-quarter profit and told investors it was keeping its outlook for the year unchanged, even with commodity and energy prices swinging unpredictably.
The headline figure came from an accounting event rather than from showroom sales. BMW revalued its stake in its Chinese joint venture with Brilliance Auto Group, and the carmaker said the revaluation produced a preliminary profit of 7.7 billion euros, or about $8.2 billion. The revaluation followed a deal announced in February, when BMW said it would pay 3.7 billion euros to lift its holding in the venture from 50% to 75%. That move came after it secured the necessary licence from Beijing.
With that one-off included, BMW's net profit for the quarter came to 10.2 billion euros, against 2.8 billion euros a year earlier. The stake made the results harder to read, as Jefferies analyst Philippe Houchois noted in a client note. He wrote that it complicated the picture, but that the numbers still looked like a significant beat.
Stripping the joint venture out, the underlying business still grew. Revenue rose 16.3% in the quarter, even though car sales fell 6.2%. Operating profit, excluding the stake's impact, was 3.4 billion euros, up from 3 billion a year before. Higher prices explain much of the gap between fewer cars sold and more money earned.
Those prices are a product of the industry's supply troubles. Carmakers have been hit by a series of pandemic-related supply chain problems, most notably a global shortage of semiconductor chips. Companies including BMW have concentrated production on higher-margin vehicles, and the lack of supply has pushed up prices for new and used cars alike. BMW said the higher prices also lifted income from selling vehicles coming off lease, particularly in the United States and Britain.
Pricing also cushioned part of the blow from rising raw material and energy costs. The company did not expect relief soon. It said the situation on commodities markets was expected to remain tense and that energy prices were likely to stay high.
Even so, BMW said the operating margin of its automotive segment should still land within a range of 7% to 9% for 2022. CEO Oliver Zipse said in a statement that the strength and resilience of the BMW Group were particularly evident in this challenging environment.
What to watch next is whether pricing can keep outrunning input costs, and how the larger Chinese stake shows up once the preliminary figure is settled and the underlying operating numbers stand on their own.
Citazioni salienti
The strength and resilience of the BMW Group are particularly evident in this challenging environment.— Oliver Zipse, BMW CEO
The stake complicated BMW's results, but the numbers look like a significant beat.— Philippe Houchois, Jefferies analyst (paraphrased)
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