BMW AG ended an upbeat quarter for European automakers by warning that the rapidly resurging coronavirus pandemic could wreck a sales recovery driven by strong demand in China.
BMW confirmed its full-year profit forecast on the back of rising sales in China. Still, the German luxury carmaker cautioned that Covid-19 is worsening in Europe’s biggest markets, with fresh lockdowns threatening to crimp demand for its automobiles.
“The pandemic is now clearly regaining momentum,” BMW said Wednesday in a statement. If it worsens and drags down the global economy, “the risk exposure could be considerable, particularly on the demand side.”
Governments across Europe have in recent days restricted public life to contain the spread of the virus, with the U.K. and France announcing partial lockdowns that will also close car dealerships. While those businesses remain open in Germany, Chancellor Angela Merkel’s government is urging citizens to stay home whenever possible.
BMW’s results round off a surprisingly upbeat quarter for carmakers. Peers including Daimler AG, Tesla Inc. and Fiat Chrysler Automobiles NV released third-quarter figures that were better than expected, bolstered by swiftly recovering demand and bigger subsidies for electric cars.
Profit Misses
BMW said its sales in China, the world’s biggest auto market, climbed more than 6% in the nine months through September to a record thanks to an economic recovery that gathered pace after the country emerged from a lockdown in the spring.
The manufacturer said third-quarter earnings before interest and taxes fell 16% to 1.92 billion euros ($2.2 billion). That missed analysts’ estimates of 1.99 billion euros.
BMW declined as much as 3.5% in early Frankfurt trading, valuing the company at about 39 billion euros. Its shares have lost about 18% this year.
Chief Executive Officer Oliver Zipse has embarked on a stringent cost-cutting course to save more than 12 billion euros to help pay for the development of electric vehicles and digital features like automated driving. Free cash flow from the automotive division rose to more than 3 billion euros in the third quarter.
The carmaker confirmed it expected an earnings before interest and taxes margin of between 0% and 3% this year. It forecasts sales to be significantly lower than last year after the pandemic shut down factories and dealerships in the spring, when supply-chain issues brought down production from Detroit to Wolfsburg.
There’s no indication yet that manufacturers will have to close factories again. If sales further collapse, however, they likely would be forced to slow output and suffer another revenue setback.
BMW said it’s “monitoring developments closely and remains well prepared to act swiftly and decisively.”
