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BMW profits benefit from Chinese joint venture and high prices

The BMW logo is seen during the Munich auto show, IAA Mobility 2021 in Munich, Germany, September 8, 2021. REUTERS/Wolfgang Rattay

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LONDON, May 5 (Reuters) – BMW (BMWG.DE) on Thursday reported higher first-quarter profits, boosted by a revaluation of the German automaker’s stake in its Chinese joint venture and high prices, and maintained its outlook for 2022, despite the volatility of commodity and energy prices.

A global shortage of semiconductor chips has hit car production across the industry, but BMW said demand for its vehicles remained “very robust”.

“Never before in the history of our business have our pre-orders been higher than they are today,” chief executive Oliver Zipse said on a conference call. “Markets are signaling that this strong demand will continue.”

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BMW shares rose 1.9% in morning trading.

Zipse said the company doesn’t expect chip supplies to improve until at least the second half of 2022, adding, “We will still face an underlying shortage throughout 2023.”

The world’s No. 4 automaker Stellantis (STLA.MI) also reported a revenue surge on Thursday despite a chip-fueled drop in car sales. Read more

The chip shortage has prompted automakers, including BMW, to focus on producing higher-margin vehicles. The reduced supply has pushed up prices as affluent car buyers can still afford to pay more.

But that put new cars out of reach for many ordinary people. In the US market, for example, the average price for a vehicle transaction reached $44,129.

The impact of this limited supply market has also passed through to used car prices.

April was the 25th consecutive month of used car price growth in Britain, with prices up more than 32%, online vehicle market Auto Trader (AUTOA.L) said on Thursday.

“The cars they’re looking at are from previously cheaper ‘buckets’,” he added, however, because consumer budgets hadn’t increased.

BMW said the revaluation of its stake in its joint venture with Brilliance Auto Group resulted in a preliminary one-time profit of 7.7 billion euros ($8.2 billion).

In February, BMW said it would pay 3.7 billion euros to raise that stake to 75% from 50% after securing the necessary license from Beijing. Read more

In a client note, Jefferies analyst Philippe Houchois wrote that the stake complicated BMW’s results, “but these numbers look like a significant beat.”

Excluding the impact of the stake, BMW posted a 16.3% increase in revenue for the quarter, despite a 6.2% decline in car sales as higher prices helped.

High vehicle prices have also helped BMW partially offset rising raw material and energy prices, and the company said it expects those prices to remain high.

Despite the volatility, the automaker said its automotive segment’s operating margin is expected to be between 7% and 9%.

The company published a net profit of 10.2 billion euros against 2.8 billion euros a year earlier. Excluding the impact of the stake in its Chinese joint venture, BMW posted an operating profit of 3.4 billion euros, against 3 billion previously.

($1 = 0.9422 euros)

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Reporting by Nick Carey; Editing by Jason Neely and Clarence Fernandez

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