BMW warns of demand for new vehicles

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BMW AG says new vehicle orders are pulling back from high levels as inflation and higher interest rates hit consumers, making the company the first of the major automakers to become more cautious.

The Munich-based manufacturer sees vehicle orders normalize towards the end of the year, especially in Europe, it said on Wednesday. Current order books are at an all-time high due to pent-up demand from the ongoing shortage of semiconductors.

“For new incoming orders, we are registering a drop from last year,” BMW chief executive Oliver Zipse said during a phone call with reporters. The decline is most noticeable in Europe in the 1 and 2 Series compact vehicles, while demand for BMW’s lucrative X Series SUVs and the 5 Series sedans is still strong, he said.

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BMW stuck to a forecast of car production returns of between 7% and 9% for the year, thanks to strong car prices and model range and demand for used cars. The manufacturer also said it cannot fully pass on rising material costs, while internal savings will mitigate the impact.

The company is sounding an early warning bell, even as demand for cars has remained high so far amid deteriorating global economic prospects and record inflation. Both Mercedes-Benz AG and others have recently raised their expectations for the year and warned that economic risks are mounting.

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BMW is the first automaker “to signal caution on demand,” Bernstein analyst Daniel Roeska said in a note. “This implies a weakening of sentiment today, even as manufacturing picks up across the industry.”

Shares fell a whopping 6.2% in Frankfurt, the most since March 10, and fell 5% at 12:10 p.m.

gas saving

The car manufacturer is also stepping up preparations for a possible gas shortage in Europe. BMW has 37 gas-fired plants that generate heat and electricity at its plants in Germany and Austria and is considering using local utilities instead.

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“Shifting power generation at that magnitude is not trivial and will be very expensive,” Zipse said.

He also echoed warnings from plastics producer Covestro AG about the impact of a total shutdown of gas supplies on the wider supplier network.

“It’s not our direct suppliers, but our suppliers’ suppliers, those whose production relies on process gas,” who are at risk, Zipse said. “For them, production comes to a standstill fairly quickly if the natural gas is completely shut off.”


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