BMW Cash Flow Beats Estimates as Carmakers Sustain Recovery

(Bloomberg) -- BMW AG generated more cash than expected last year, joining German peer Volkswagen AG in posting upbeat preliminary earnings after sustaining a recovery from coronavirus disruptions.

Automotive free cash flow rose to 2.8 billion euros ($3.4 billion) in the final three months of 2020, almost double the year-earlier period, the Munich-based manufacturer said in a statement late Wednesday. The company reiterated that margins will be at the higher end of a range of as much as 3%.

Still, BMW declined as much as 3.9% in Frankfurt trading on Thursday amid wider market weakness. Juergen Pieper, an analyst at Bankhaus Metzler, said the company’s margins aren’t as good as VW’s, and cost-saving measures like reducing inventories aren’t repeatable.

Sales of both carmakers rebounded after a difficult first half of last year, with demand coming back particularly strong in China. Coronavirus lockdowns still weighed on full-year shipments, and Daimler AG’s Mercedes-Benz maintained its leadership of the global luxury-car segment for a fifth consecutive year.

BMW’s figures are less of a surprise following VW’s results, and as several European countries have extended lockdowns, the manufacturer’s fourth-quarter recovery “may be short-lived,” said Michael Dean, an auto-industry analyst at Bloomberg Intelligence.

While BMW is doing well in China -- its largest market -- the manufacturer is under growing pressure there as upstarts including Tesla Inc., Nio Inc. and Li Auto Inc. gain share. BMW is responding to the threat by expanding its electric offerings, with the iX sport-utility vehicle and the i4 sedan expected to go on sale this year and in 2022, respectively.

Used-Car Boon

BMW also benefited from better-than-expected results from remarketing used cars, a segment bolstered by consumers seeking alternatives to public transport because of the pandemic. That market, along with what the company called “focused” management of inventories, helped increase free cash flow to about 3.4 billion euros last year.

The German manufacturer this week was among a group of 42 companies approved to get about 2.9 billion euros in state aid for battery projects that will strengthen Europe’s position in the race to produce more electric vehicles.

BMW also will invest a three-digit million euro amount in internet marketing and sales processes as it bets online purchasing will help compensate for pandemic-related dealership closures in its major markets.

The company is scheduled to publish detailed full-year earnings on March 17.

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