Thanks to wealthy Chinese customers, BMW saw its worldwide second quarter profits jump 83 per cent to $2.64 billion.
Sales volumes jumped 60 per cent in China in the first half of 2011 and were up nearly 70 per cent in Brazil. They doubled in India and almost tripled in Turkey.
Chinese demand for models like the top-of-the-line 7-Series and revamped 5-Series sedan allowed BMW to charge higher prices and offer fewer margin-eroding incentives than ever before.
'What the market completely underestimates is the impact Chinese demand has on overall global pricing. Were it not for China, BMW would have to sweeten its leasing conditions to sell those additional 20,000 units of its 7 Series,' UniCredit analyst Georg Stuerzer told UK website This is Money.
Bernstein analyst Max Warburton called the results 'quite simply awesome' as BMW came in third only to luxury sports car makers Porsche and Ferrari in terms of sheer earnings power in the global auto industry.
'For an analyst that's covered BMW for 11 years it's amazing to see this level of earnings,' he said in a note to clients. 'At no point in the past would it have been imaginable that this company could make margins of this level.'
Chief Executive Norbert Reithofer admitted BMW could not keep pace with this demand, losing out on potential sales as manufacturing plants were already running flat out. To better profit from developing economies, he expects his board will approve this autumn plans to build a car assembly site in Brazil, its first ever in Latin America. Reithofer admitted the environment in western economies will remain extremely volatile.
'Global risks continue to increase rather than decrease. There are concerns about the sizeable national debt of many countries,' he said after U.S. politicians struck a last-gasp deal to raise the country's borrowing limit, warding off the risk of a debt default. —Paul Duchene
