There has recently been a great deal of excitement surrounding BMW CEO Oliver Zipse. The 59-year-old manager, who has been in charge of the group's fortunes since August 2019, will reach BMW's internal age limit next year. Zipse's good performance, however, made the board of directors merciful, and a few days ago the board extended the manager's contract until 2026. "Oliver Zipse has steered the company very successfully through an extremely volatile environment in recent years," said Norbert Reithofer, chairman of the board of directors, explaining the decision. This also caused a sigh of relief on the stock market.
Zipse's success can be expressed in figures: During his tenure so far, BMW's enterprise value has increased by a whopping 60%. This rise has been accompanied by significant operational progress. While the group generated a return before interest and taxes of only 4.9% in its core automotive segment in 2019, this figure had already risen to 8.6% by the full year 2022. In the first half of 2023, the Munich-based company even made the leap into the double-digit range and reported an EBIT margin of 10.6%. In addition, the manager, who began his career at BMW as a trainee in 1991, is stepping on the gas in the promising e-mobility business. Since Zipse ascended the throne, the share of electrified cars has risen from 5.8% to 18.1% by the end of 2022. In order to further expand this share, the group is currently spending a lot of money. The "white-blue" company has just announced that it will invest more than 600 million pounds in England to build the two new all-electric models Mini Cooper and Mini Aceman there from 2026, in addition to the current production in Germany and China.
However, the original British small car is only one of the screws on which BMW is turning in order to jet into a successful future. The Bavarians are currently playing their biggest growth option with the so-called "New Class". These vision cars, which were presented for the first time this year at the IAA motor show, herald a new era comparable to that under the legendary group head Eberhard von Kuenheim in the previous millennium. During his tenure from 1970 to 1993, the now 95-year-old BMW veteran had transformed the company from a medium-sized automaker into a global corporation with the introduction of the 3 Series, 5 Series and 7 Series. Now the next stage of transformation is upon us. "The New Class is by far the biggest investment in our history," is how Frank Weber, Member of the Board of Management for Development, describes the upheaval. And BMW chief designer Adrian van Hooydonk confidently adds: "We want to make this generation of vehicles so modern that it looks like we've skipped a generation."
With this own platform for electric cars, the Germans are primarily trying to steal a march on market leader Tesla. This is not only true in terms of sales figures, but also in terms of returns BMW wants to keep the margin high despite high research and development costs, in the first semester the company spent about a tenth more at EUR 3.2 billion. According to Zipse, the vehicles of the New Class, which will roll over the roads from 2025, will be "very profitable." For the next decade, the manager has set himself the target of generating a return of 8% to 10% in the car business, and this in every single quarter.
Targets for the current year were raised at the half-year mark. Thanks to the success of the electric cars and strong demand in the USA, sales are expected to rise by 5% to 10%, compared with an increase of less than 5% previously expected. The current large order backlog, which the company says ensures delivery times of up to 7 months, backs up the forecast. Profitability is also expected to be higher than previously thought. The group is now targeting a return of 9% to 10.5%; previously, the margin target was limited to the long-standing range of 8% to 10%. The optimism on the earnings side is due in part to BMW's strong pricing discipline. Zipse gave a clear rejection to the price war instigated by e-car pioneer Tesla.
On the stock market, BMW shares have taken off strongly this year and have already sniffed the record high of EUR 123.75 from 2015. However, the DAX stock recently swung into a consolidation phase, which is currently taking place just below the EUR 100 mark. Investors can turn this sideways movement into attractive gains with two new softcallable barrier reverse convertibles. With a maximum maturity of 15 months and a risk buffer of a comfortable 35%, the CHF-denominated version offers an interest rate of 8.00% p.a. The EUR-denominated product even offers a coupon of 10.00% p.a. For both products, a soft call occurs for the first time after 6 months.
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