The Hungarian mistake cost BMW badly

BMW shareholders received a double slap in this morning’s trading. The price of the company’s shares fell by nearly 5 percent after opening in morning trading, and then began to recover from there due to the double impact of its poor quarterly results and the expected election victory of Donald Trump. The victory of the Republican candidate will have a sensitive effect on the prospects of European car manufacturers anyway, as many are afraid of the introduction of new market protection measures in the event of a Trump presidency, which was pointed out by the report on the poor quarter, although the latter hardly caught investors by surprise.

The management of BMW already warned in September that it is forced to reduce its expectations for this year by one brake system problem which resulted in the recall of more than 1.5 million vehicles. As it turned out, the failure of the brake system could be traced back to a problem at Continental’s plant in Hungary.

At the beginning of October, it was already announced that the group’s sales fell by 13 percent to 540,882 units in July-September, while in China they fell by 29.8 percent to 147,691 units. We wrote more about this here.

The company achieved an operating profit of 1.7 billion euros in the third quarter, which is 61 percent less than the 4.35 billion euros of the same period last year, the market consensus is Reuters was around 1.7 billion euros. Sales fell by 15.7 percent to 32.4 billion euros from 38.46 billion euros a year earlier, which is almost 2 billion less than the market expected. The operating profit ratio was terribly low, just 2.3 percent in the July-September period.

At the same time, the company’s management is now quite optimistic about the future. They announced that in 2024 they will continue to strive to achieve an operating profit margin of between 6 and 7 percent, and in the meantime they are well on their way to achieving the plans for the entire year, which have been significantly reduced by now. In the fourth quarter, they plan to deliver the 320,000 vehicles whose delivery was previously delayed due to problems with the brake systems.

However, the problems of the Chinese market are expected to remain permanent, with which not only BMW, but also other major players in the industry, such as Mercedes and the Volkswagen group, will have to deal with it.

In addition, technically, the outlook for BMW shares still does not look good. After the fall in September, the share price managed to rise temporarily, but this can also be considered a so-called “retest” of the previously broken support level. Thus, the target price projected by the previously drawn figure, which is well below EUR 60, more than 15 percent lower than the current level, may still be alive. You can read more about this here.

Toyota is also in trouble

Meanwhile, weaker demand in the second quarter also hampered the march of Japanese Toyota. For the first time in two years, operating profit fell on a quarterly basis, falling by 20 percent to 1.16 trillion yen (just under seven billion euros), the company announced. Prior to this, the world’s largest car manufacturer was able to consistently show good results, mainly due to the demand for its hybrid models in the US and other large markets.