During an earnings call on Wednesday, the BMW Group announced it had experienced a 42.4% increase in third quarter net profits to $2.99 billion, reflecting how higher prices and BMW’s EV sales have counterbalanced lower deliveries due to scarce chips. Net profit for the third quarter of 2021 amounted to €2.58 billion ($2.99 billion), a rise of 42.4%. This was despite deliveries in its automotive segment dropping by 12.2% compared to Q3 2020.
BMW’s EV Sales & Projections
BMW’s EV sales grew by 121.4% in the first 9 months of 2021, hitting 59,688 units. That achievement of positive business development “confirms our strategic course,” board finance member Nicolas Peter said during the earnings call. Peter noted the company was confident of exceeding its target for a 10% margin on pre-tax earnings this year, but also acknowledged that Q4 might be slightly less remarkable due to increased investment costs and tax liability. “We anticipate a further increase in capital expenditure in the fourth quarter, as well as significantly higher advance tax payments.”
The European Automobile Manufacturers’ Association said recently that new car registrations in September were down 25% from a year earlier, primarily because dealers don’t have enough cars to sell because of a shortage of semiconductors. In the third quarter 2021, BMW Group operations were increasingly impacted by similar global supply problems. “As expected, semiconductor supply bottlenecks slowed down sales in the third quarter,” Peter explained. “However, thanks to our ability to respond quickly and the high level of flexibility in our global production system, we were able to limit the impact on vehicle manufacturing.”
Automakers from Volkswagen to Stellantis to Renault also saw dampened third quarter sales due to scarce chip supply, as reported by Reuters. The consultancy BCG expects a total of 10 to 11 million fewer cars to be produced worldwide this year because of the shortage.
Importantly, the BMW Group sold 231,575 all-electric and plug-in hybrid vehicles between January and September, a jump of 98.9%. By comparison, in the third quarter of 2021 alone, Tesla CEO Elon Musk says it delivered 241,300 vehicles.
Tesla Continues to Top EV Global Sales
Tesla’s Q3 operating cash flow was $1.3 billion and achieved its best-ever net income, operating profit, and gross profit while also reaching an operating margin of 14.6%. This exceeded its medium-term guidance of “operating margin in low-teens.” The company added that this level of profitability was achieved while its ASP2 decreased 6% year over year in Q3. That was due to the continued mix trend toward lower-priced vehicles.
Tesla also noted that EV demand is going through a structural shift. As more and more Tesla brand EVs appear on roads, a whole new slew of Tesla owners seem to be sharing their positive experiences owning an EV, thus creating a cyclical effect where a whirl of Tesla positive buzz emerges.
Like other automakers at this time, Tesla addressed in the quarterly update deck that semiconductor shortages and congestion at ports were impacting the company’s full potential. “We believe our supply chain, engineering, and production teams have been dealing with these global challenges with ingenuity, agility, and flexibility that is unparalleled in the automotive industry. We would like to thank everyone who helps advance our mission.”
Tesla added that it plans to grow its manufacturing capacity as fast as possible and expects to achieve 50% average annual growth in vehicle deliveries over a multi-year horizon. It has enough cash to fund its product roadmap, long-term capacity expansion plans, and other expenses. The company anticipates that its operating margin will to continue to grow over time, reaching industry-leading levels. It’s a projection that many other automakers, like the BMW Group, would like to emulate.
Focusing on the Transportation Footprint
The BMW Group is in step with the prevailing zero emissions transportation zeitgeist. The company wants fully electric vehicles to represent at least 50% of its deliveries by the year 2030. The increasing importance of electric mobility comes at a time when major economies around the world are attempting to reduce the environmental footprint of transportation. Of the roughly 66,000 pounds of CO2e emitted over the lifetime of an internal combustion engine car (assuming 93,000 miles driven), 84% comes from the use phase.
The European Commission, the EU’s executive arm, is targeting a 100% reduction in CO2 emissions from cars and vans by 2035. The EU is requiring that automakers sell more efficient EVs or pay big fines. All of a sudden, automakers have discovered that consumers will, indeed, buy millions of EVs if they are produced and marketed well.
The Biden administration wants to reduce carbon pollution from the transportation sector by cutting tailpipe emissions and boosting the efficiency of cars and trucks; providing funding for charging infrastructure; and, spurring research, development, demonstration, and deployment efforts that drive forward very low carbon new-generation renewable fuels. These would fit for applications like aviation and other cutting-edge transportation technologies across modes.
The UK wants to stop the sale of new diesel and gasoline cars and vans by 2030. It will require, from 2035 onward, all new cars and vans to have zero tailpipe emissions.
The List Grows Longer: Legacy Companies Plan Transition to EVs
The plugin electric vehicle market has exploded in the past year. BMW is just one of several well-known companies pushing an electrification strategy. A record number of almost 100 pure battery electric vehicles are planned to debut by the end of 2024. Here are some companies to watch.
- In March, Volvo Cars said it planned to become a “fully electric car company” by the year 2030.
- In April, General Motors said it plans to stop selling gas and diesel vehicles by 2035, with the Cadillac line most deeply committed to 2030 full electrification goals. The first offering will be the Lyriq crossover SUV next year.
- In July, the Volkswagen Group said half of its sales were expected to be battery-electric vehicles by 2030. By the year 2040, the company said almost 100% of its new vehicles in major markets should be zero-emission.
- Jaguar has launched a plan for its all-electric models under the “Reimagine” slogan. By 2030, the company will devote a $3.4 billion annual investment in EVs. The Jaguar I-Pace is destined to perch on the company’s new Electric Modular Architecture (EMA) platform. There will be an electric Land Rover in 2024, then an electric Range Rover. In total, there will be 6 electric Land Rovers over the next 5 years.
- By 2026, every Bentley will be a plug-in hybrid or all-electric model. And, according to CEO Adrian Hallmark, “The future of Bentley will be fully electric. By 2030, no more combustion engines. We are not only working on one electric car but a full family of electric cars.”
The falling cost of producing batteries for electric vehicles, combined with dedicated production lines in carmakers’ plants, will make EVs cheaper to buy than gas-powered cars, on average, within the next 6 years. And that’s even without any government subsidies. A study from BloombergNEF explains that the current average pre-tax retail price of a medium-sized electric car is €33,300 ($40,700) , compared with €18,600 ($22.800) for a petrol car, according to the research. In 2026, both are forecast to cost about €19,000 ($23,300).
The sales launch of the BMW iX and the BMW i4 in November, 2021 marked the beginning of a new era in the company’s purely electric premium mobility. With enhanced sustainable innovations in driver assistance systems and the BMW iDrive operating system, the BMW Group has seen the EV light shining on the future of “intuitive interaction between driver and vehicle.”
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