BMW commits to China as supply shortage eases

BMW has purchased an additional 25% stake in its Chinese joint venture, BMW Brilliance, following a successful third quarter of the year.

The move, which cost €3.7 billion (£3.2bn) and increases BMW's stake to 75%, comes as the company reports strong growth in the region.

Whereas BMW deliveries were reduced in Europe and the Americas between July and the end of September this year, its Asian business actually grew, to 274,474 units. This marks a 7.7% improvement on the number of sales in the region during the third quarter of 2021 – a result of Covid-19 lockdowns in China easing, according to BMW.

The German firm also extended its contract with the joint venture – which was due to lapse in 2028 – to 2040.

The news accompanies BMW's announcement of its performance for the third quarter this year, in which it posted €4.1bn (£3.5bn) in profit before tax – growth of 20% compared with the same period last year.

This was despite a 0.9% shortfall in car deliveries compared with July-September 2021, slipping to 587,744.

The firm said semiconductor supply shortages – due to lockdown restrictions in China – hampered vehicle production volumes through most of the quarter but they began to ease slightly as it ended. BMW is optimistic about this situation improving. “Deliveries are expected to increase significantly in the fourth quarter 2022 compared with the preceding three-month period,” it said in a statement.

Nonetheless, the company has maintained the full-year outlook it established at the end of June. This is because it expects fast-rising inflation and interest rates to hit demand and “normalise” its above-average order backlog.

The outlook assumes that sanctions on Russia – spurred by its invasion of Ukraine – will not tighten, and that gas supplies will not be further interrupted. It also assumes that geopolitical conflict outside of Ukraine will not worsen, and that there will be no more “significant and lengthy” pandemic-related lockdowns. Such challenges cloud any prediction made for 2023, which could yield industry-wide recovery – or incur another year of strife – depending on fragile geopolitical situations.