(Bloomberg) — BMW AG is going against the tide of warnings due to a worsening chip shortage to raise profit expectations for this year as higher car prices counter the crippling supply chain crunch.
The German luxury carmaker expects earnings before interest and taxes on automaking of between 9.5% and 10.5% on sales, up from a previous view of 7% to 9%, BMW said late Thursday. The company also raised returns for its financial services unit.
“Whilst the semiconductor supply restrictions are expected to further impact production and deliveries, the continuing positive pricing effects for both new and pre-owned vehicles will overcompensate these negative sales volume effects,” the Munich-based company said.
BMW fell 1.3% in early trading in Frankfurt as Germany’s leading DAX index declined 1.6%.
BMW’s new guidance runs counter to headwinds facing the world’s automakers fighting a global chip crisis that reached a peak during the first quarter. Forecaster IHS Markit in mid-September made the biggest adjustment yet to its auto-production projections, which have been falling all year due to the global chip shortage. The cut prompted suppliers like Faurecia SA and Volkswagen AG’s truck division Traton SE to warn of lower sales.
BMW’s earlier, more cautious guidance “turned out to be a useful contrarian warning about continuing disruptions across the industry, which BMW has continued to navigate better than most,” Jefferies analyst Philippe Houchois said in a note.
Amid the dearth of chips, carmakers have prioritized making their most lucrative models, and empty dealer lots have pushed up the price of new and used vehicles alike. Like Toyota Motor Corp., BMW managed to hold out longer than most peers before making production cuts.
BMW’s earnings before tax for the year are still expected to rise “significantly” and free cash flow is seen at around 6.5 billion euros ($7.5 billion), the company said.
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