BMW Expects `Significant' First-Half Sales Increase, Led by Chinese Growth
“We see definite growth in emerging markets,” Chief Financial Friedrich Eichiner said yesterday in Cape Town, South Africa. “Double-digit growth in China is expected, but also in countries like Brazil, Korea and in Russia there should be significant growth. We see the U.S. market coming back.”
Demand for luxury cars has bounced back from the global recession on growing wealth in developing countries and a rebound in the U.S. BMW, which also makes Mini and Rolls-Royce cars, aims to beat its 2007 sales record of 1.5 million vehicles this year after a 14 percent gain to 1.46 million cars and sport-utility vehicles in 2010. Daimler AG’s Mercedes-Benz and Volkswagen AG’s Audi are also targeting record sales in 2011.
“For BMW, it will be decisive how strong the growth in China is,” said Daniel Schwarz, a Frankfurt-based analyst with Commerzbank, who rates the stock “hold.” While efforts by the Chinese government to slow down the economy could soften demand, “growth in China is structural and should provide a basis for the long term,” he said.
BMW shares rose 0.6 percent to 57.66 euros at 9:43 a.m. in Frankfurt trading, valuing the company at 36.8 billion euros ($50.2 billion).
Booming demand from China is likely to offset slowing gains in Europe, where several countries have been beset by debt crises, Eichiner said. Growth in Germany, BMW’s biggest market, will be about 5 percent to 6 percent, Eichiner said.
BMW is expanding factories to keep up with demand as it targets sales of 2 million vehicles by 2020. The Munich-based manufacturer will spend 400 million euros at a plant in Leipzig, Germany, to add production of an electric city car by 2013. The Munich-based automaker late last year completed a $750 million expansion of its U.S. factory in Spartanburg, South Carolina, to make room for the revamped X3 sport-utility vehicle.
“We have the principle that the production should follow the market,” Eichiner said. “As we see significant growth in markets like China, it’s clear that the capacity in China will be increased. We have already taken the decision for a new plant in China that will start in 2011.”
BMW has invested about 500 million euros in the Chinese plant, which will initially be able to produce 75,000 vehicles a year. The plant’s capacity is likely to be doubled to 150,000 units at a cost of an additional 500 million euros, and then doubled again to 300,000 -- which should occur within five years, Eichiner said.
BMW may also further expand its plant in Spartanburg, South Carolina. While production is likely to be increased at its German plants, the company is unlikely to open a fifth factory in the country, Eichiner said.
BMW, which has added production outside Germany and buys more supplies in dollars to reduce its exposure to foreign exchange fluctuations, has hedged against changes in the value of all major currencies, including the dollar, pound and yuan, BMW’s CFO said.
“We have a really good hedging position,” Eichiner said. “We are not expecting a lot of headwind coming from this side. I’m not nervous when it comes down to the hedging for 2011.”
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