BMW: Highlight at the IAA

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  Christian Ingerl
  Redaktor

The gates to the International Motor Show (IAA) in Munich opened yesterday, Tuesday, September 9. For six days, the crisis-ridden industry will be showing how it intends to return to the fast lane. With almost 750 exhibitors from 37 countries, the number of visitors is enormous. One company in particular is in the spotlight: BMW. After four years of preparation, the German premium manufacturer is presenting its “New Class”. The electric SUV iX3, which according to the CEO is BMW’s “biggest project for the future”, was presented as the first vehicle in the series in the run-up to the trade fair. Analysts are also enthusiastic: “The car is a milestone for BMW,” says Pal Skirta, automotive analyst at Bankhaus Metzler.

With the New Class, BMW wants to regain ground, especially in the difficult Chinese market. In the first half of the year, the Munich-based company’s sales in the People’s Republic fell by 15.5%. “With increasing availability of the New Class, we will see growth in China again,” said CFO Walter Mertl confidently at the IAA, adding: “When I look at our future model range, I’m not worried.”

Increasing margin strength

As the past has shown that the old paradigm of “more units = more profit” no longer applies, BMW is also concerned with producing future models as profitably as possible. According to financial juggler Mertl, this is also the case. The battery in the new vehicles is 40% to 50% cheaper than in the existing models. This alone is enough for the iX3 50 to achieve margin parity with the comparable combustion model in Germany as early as next year. By the end of the decade, the electric vehicles based on the New Class will then replace the older models, which means that the strategic target of an operating margin of 8% to 10%, which BMW has repeatedly achieved in the past, will remain in place. The cheaper batteries in the new vehicles are therefore the key factor in increasing profitability again.

Braking factor customs duties

In terms of returns, tariffs are currently a headwind. According to the current agreement with the USA, 15% duties are due on cars. At BMW, this will reduce the profit margin by 1.25%. However, CFO Mertl does not see this as a permanent burden and does not expect that “the tariffs will still be where they are today in three years’ time.” Despite a weak first half of the year, BMW is also optimistic about the current financial year. The profit margin, which was only 5.4% in the second quarter and thus three percentage points lower than in the previous year, is expected to reach the expected range of 5% to 7% despite all the burdens.

The three-digit range calls

Stock market analysts are also positive about BMW, which has already gained 11% this year and thus performed significantly better than its two premium rivals Porsche and Mercedes-Benz, whose share prices are in the red. Recently, the white-blue car share also managed to break out to a new high for the year. This was followed by a consolidation at the EUR 90 mark, which has now extended towards the 100- and 200-day moving averages. According to an insider at the motor show, the recent intensification of the consolidation was caused by the Management Board allegedly expressing disappointment about the third quarter. There has been no official statement on the matter, meaning that the speculation has quickly fizzled out and the setback could prove to be an entry opportunity.

If the analysts at UBS have their way, this is likely to be just a short breather anyway. The major Swiss bank already raised its price target to EUR 100 at the beginning of August. It will now be interesting to see whether other research houses also dare to come out of hiding, especially after the recent presentation of the New Class.

Investment solutions

Risk-tolerant investors who not only want to ride the potential upward trend of the BMW share, but even accelerate it, can do so with the Mini Future Long MBMBAT from Leonteq. The product offers a multiplier of 4.6 and the stop-loss level is EUR 70.4327, just under a fifth away. The identical product MBMADV from Bank Vontobel has even more speed with a leverage of 7.4. Attention, the high profit opportunity does not come without increased risk. The stop threshold of EUR 78.04 is only around 10.8% away.

We also consider sideways speculation to be interesting for conservative investors. The Barrier Reverse Convertible FAHFJB issued by Julius Baer in August is ideally suited for this. The security promises a double-digit percentage profit opportunity of 14.4% and is also equipped with a risk buffer of 27.7%.