BMW, Ferrari, FCA, and PSA All Return to Profit in Q3

By Mariliana Fotopoulou Wednesday, November 4, 2020

Nearly all major car makers across the globe reported positive Q3 earnings reports as the car industry bounces back from a pandemic-fueled sales dip. BMW, Ferrari, FCA, and PSA all recorded robust growth in the third quarter but have warned that further lockdowns will yield another round of heavy blows.

BMW and Ferrari Record Strong Sales of Luxury Vehicles

BMW reported that its profit in the third quarter grew by 10%, driven by a surge in demand in China for its luxury vehicles. However, the German carmaker voiced its concerns about the second wave of coronavirus pandemic and the risk it presents for its operations.

Shares of BMW slipped on Wednesday, while sales of its luxury vehicles hit a new peak in the third quarter.

“After a more stable phase in the economic environment in the third quarter, the pandemic is now clearly regaining momentum,” BMW said in the statement.

“If the pandemic takes an even more serious course and the global economy experiences a perceptible downturn, the risk exposure could be considerable, particularly on the demand side.”

The carmaker’s quarterly profit before taxes bounced back in Q3 and climbed by 9.6% to €2.46 billion ($2.88 billion), fueled by a surge of 8.6% in luxury vehicle deliveries.

The automotive earnings before interest and tax (EBIT) margin advanced to 6.7%, from -10.4% in the previous quarter and 6.6% last year.

The German automaker said its car deliveries soared by 9.8% in the quarter, driven by a 31% surge in the Chinese market, which has largely compensated for a sharp decline in demand in the US.

Similarly, BMW’s Italian counterpart Ferrari also reported strong sales in the third quarter. As a result, the iconic car brand now estimates its 2020 earnings to be higher than its previous guidance range after the company reported better-than-expected earnings for the third quarter, thanks to a surge in demand for its new luxury vehicles, including the €430,000 ($505,000) “SF90 Stradale” model. Additionally, the deliveries of “F8 Spider” and the “812 GTS” models surged.

The carmaker said it estimated its adjusted core earnings to be close to €1.125 billion ($1.32 billion) in 2020, versus the previous guidance range of €1.075-€1.125 billion ($1.2-$1.32 billion). This estimate is based on hopes that the coronavirus pandemic won’t keep weighing on the market conditions.

Louis Camilleri, the CEO of Ferrari, said the new outlook is based on the company’s expectations of a “very strong” fourth quarter, which involves hitting historical quarterly volumes, revenues, and earnings before interest, tax, depreciation, and amortization (EBITDA).

“Solid proof that we are now running on all cylinders,” Camilleri said. “We’ll enter 2021 with a very strong order book, we should have a pretty strong year.”

The shipments were 6.5% in the red year-over-year in Q3, Ferrari said after some of its models came to the end of their lifecycle.

FCA and PSA Sales Rebound As Well

Fiat Chrysler Automobiles (FCA) and PSA Group echoed positive reports from rival BMW and Ferrari. The Italian-American carmaker Fiat Chrysler returned to profitability in the third quarter, helped by a spike in sales of pickup trucks and Jeeps after being forced to halt its operations due to the pandemic.

The company reinstated its profit outlook for this year, presuming the second wave of the pandemic will not hurt its business. The carmaker said its available liquidity was €27.1 billion ($31.74 billion) since September and that it was looking to roll out three new vehicles from its Jeep series next year.

Mike Manley, the CEO of Fiat Chrysler, said all of the company's factories are now operating close to levels before the outbreak.

The company reported an industrial free cash flow of €6.7 billion ($7.85 billion) during Q3, which Manley referred to as a “nice turnaround” to the cash burn in the first half of 2020.

Fiat Chrysler and PSA Group, the manufacturer of Peugeot, Citroën, and Opel, are set to merge by the end of the first quarter of 2021, while approval from the European Union for that deal is expected before February 02, 2021.

PSA Group reported revenue of €15.45 billion ($18.1 billion) in the third quarter, compared to the revenue of €15.58 billion ($18.24 billion) from the same period last year. The company aims to deliver more than 4.5% automotive adjusted operating margin on average between 2019 and 2021.

The company’s robust product mix arises from the success of some of its last rollouts, including Peugeot 208, Peugeot 2008, Opel Vauxhall Corsa, as well as Citroën C5 Aircross PHEV.

The carmaker shipped 589,000 vehicles around the world in the third quarter while continuing to focus on making profit and cash generation. Total inventory, including independent dealers and importers, amounted to 428,000 vehicles by the end of September, 26% lower than in the year-ago period.

PSA Group estimated a decline of 25% in the European market, a 30% drop in Latin America, and 20% and 10% in Russia and China, respectively.

Summary

The German carmaker BMW said its Q3 profit increased by 10%, driven by a surge in demand in the Chinese market, while its Italian counterpart Ferrari reported higher-than-expected earnings results for the third quarter and hiked its 2020 earnings outlook.

Fiat Chrysler and PSA Group, which are locked in advanced talks to merge, also returned to profitability in Q3.

About the Author


Headshot for author Mariliana Fotopoulou

Mariliana has an MSC in consumer analytics and business strategy. She has a special interest in fast-moving industries and big data.

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