BMW aims to swing back to pre-pandemic operating margin of 8-10%

BMW aims to swing back to pre-pandemic operating margin of 8-10%

After remaining in the doldrums for several months during pandemic-hit 2020, German multinational automobile manufacturer BMW now aims to swing back to its pre-pandemic operating margin of 8-10 per cent.

Nicolas Peter, chief financial officer (CFO) for BMW, admitted that orders for the company’s vehicles slipped last year because of the COVID-19 pandemic-induced lockdowns, but he stressed that the company would deliver a reasonable first quarter (January to March 2021) if activity starts gaining momentum again after the middle of February.

Mr. Peter attributed the expected stronger first quarter to market conditions, a Brexit deal and BMW’s plans to increase its share in its Chinese joint venture (JV) from 50 per cent to 75 per cent in 2022. He expressed hope that the company would be able to return to its pre-pandemic operating margin of 8-10 per cent. Mr. Peter’s comments came during an interview at the company’s Munich headquarters.

Responding to a question, Mr. Peter said, “Improving market conditions, a Brexit deal and the company's plans to increase its share in its Chinese joint venture to 75% from 50% in 2022 should all help push BMW back to its pre-pandemic operating margin target of 8% to 10%. It is a goal that we're looking at systematically in the short term.”

A considerable increase in BMW’s premium car sales in China, which is the world’s largest auto market, provided a much-needed support to the company’s business. For the 2020, the company is expected to report an operating margin of between 2 per cent to 3 per cent.

It is worth noting here that automakers around the globe are trying to make a shift from conventional petrol/diesel-powered vehicles to environment-friendly EVs as government worldwide are pushing them to expand their EV portfolios to trim down carbon emissions to help protect the environment as well as public health. The shift, however, comes at a cost as it requires changes and amendments in car line-ups to enable the manufacturing facilities to produce electric powertrains.

Changing line-ups in China and Europe is costing BMW, like any other automaker, a lot of time and funds. It is for this very reason that the auto market is consolidating. The recent merger of Fiat Chrysler and PSA can be cited as one of the best example of ongoing auto market consolidation. While many automakers continue to struggle with electrification, Mr. Peter claimed that BMW could handle the transition very smoothly.

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