German Automakers Hit Notable Milestones

German automakers BMW and VW have been performing well this year as the semiconductor supply issue recedes. After a leaked report, BMW hit an 8-year high, and VW received a spike of more than 10% post-earnings release. Can they get another bump from the actual release of annual reports next week?

BMW Jumps the Gun after Leaked Report

BMW shares had been trending higher since the end of September last year, following improved guidance for 2023. The stock made a notable milestone on Thursday, closing above the €100 threshold for the first time since November 2015 after the company's results were leaked.

However, the company's earnings provided a mixed bag, leaving traders unsatisfied. Despite better sales and deliveries, profitability missed expectations, coming in 5% lower than anticipated, and that led to the sell-off under triple digits again. The firm is scheduled to report its annual results next Wednesday, the 15th. But with the copy of the annual report available to the press yesterday, the outlook remains questionable. BMW also announced the promotion of Walter Mertl to the post of CFO to replace Nicolas Peter, who is slated to retire after the AGM in May.

The profitability issue revolves around the Chinese Joint Venture, which contributed to lowering the bottom line but also to the majority of the company's cash flow. The Chinese unit, BMW Brilliance Automotive, was impacted by the lockdowns in China. BMW is doubling down on its commitment to the Chinese market after announcing it would take full control of the unit. Another bright spot for BMW is that the sales of full-electric vehicles doubled compared to the prior year, a sector that its main rival Mercedes Benz Group has struggled with.

Volkswagen Still to Deliver Annual Report

Of the automakers, Volkswagen's stock jumped by over 10% last Thursday, the 2nd, after reporting final numbers, as it confirmed growth for both the top and bottom lines. It is expected to make its annual report available during the trading session on Tuesday, which may add or remove from the trend. VW expects deliveries to increase 11.7% this year due to a large backlog of as many as 1.8M vehicles that built up during the semiconductor supply restraints period.

Volkswagen's BEV sales were up only 26%, the worst performer among German carmakers, as the company is seen to be behind in developing the software needed to support electric vehicles. The company plans to spend €18.9B in R&D this year to address the software issues related to the shift towards electric vehicles. The CEO also mentioned that new model launches were planned for 2024, which could keep profitability under pressure as the company builds the capacity to produce them.

Where to Next

Both stocks have risen since the last quarter, with BMW having registered a remarkable 3x vs its rival, as VW failed to cross the 20% barrier back in November. Currently at €18.63 and 13.53% above last quarter's threshold, it must break past €19.83 for a chance at dethroning BMW. On the other hand, if BMW manages to stay over the support at 30%, which is near the €90 handle, it could finally decisively break past €100.

Source: Barchart / BMW/VW

Key Takeaways

After a leaked report, BMW hit an 8-year high, and VW received a spike of more than 10% post-earnings release. BMW reported mixed results, with profitability coming in 5% lower than anticipated. VW is expected to make its annual report available during the trading session on Tuesday. Both companies have been impacted by semiconductor supply restraints, with BMW's Chinese unit affected by lockdowns and VW's BEV sales lagging behind others. BMW is doubling down on its commitment to the Chinese market, and VW plans to spend €18.9B in R&D this year to address software issues related to electric vehicles.