Investors have suddenly focused their interest in BMW, after the German car maker predicted a stronger earnings report this quarter. The newfound confidence comes on the heel of record vehicle sales. However, the company also admitted that their revenue is expected to diminish.
In an official statement on Tuesday, the German auto manufacturer predicted a ‘solid’ gain. This lies in sharp contrast to their previous prediction of a “slight” gain. Earnings in Q3 before taxes and interest dropped 3.2% from previous year, falling behind estimates by analysts while the margin on auto manufacturing tightened.
Juergen Pieper, an analyst at the Bankhaus Metzler bank explains BMW’s current situation by highlighting that “BMW’s quarterly performance was weak, and the boost to overall guidance largely feeds from a strong first-half of the year”. However, their success is relative. As Pieper noted, “Compared to its key competitors, the result was less strong.”
BMW will be releasing several luxury vehicles such as the 8-Series coupe and the full-size X7 sport utility vehicle, in an effort to steal market share from their main competitor, Mercedes-Benz, in a battle to dominate the luxury vehicle sector.
That being said, the entire German auto industry is still reeling from Volkswagen’s emissions scandal; the European Union is going forward with a preliminary probe investigating allegations that BMW, Mercedes parent Daimler AG and VW colluded on technology for decades. The EU has also planned to search BMW’s offices last month. During the investigation, both VW and Daimler admitted to the industry meetings in hopes of avoiding related fines. This left BMW in a compromised position with regards to future cooperation with their German counterparts.
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