Top German auto brands ride high, for now

3rd August 2010, Comments 0 comments

Strong results by BMW on Tuesday demonstrate recovery by German luxury car makers this year, with the firm reporting a seven-fold leap in quarterly profit keeping it ahead of Audi and Mercedes.

Other automotive brands such as Honda of Japan and France's Peugeot have also benefited from the recent upturn in the global economy, as have heavy truck makers like MAN, Mercedes and Scania as logistics demand grows worldwide.

The industry nonetheless expects the fast lane will come to an end later this year as major markets such as China begin to slow.

"We cannot say this will last for the next 12 months," automotive professor Willi Dietz from the German Institut fuer Automobilwirtschaft told AFP.

The market for heavy vehicles is particularly susceptible to economic trends and premium carmakers will also watch to see how Volvo fares now that it is owned by Geely of China.

That will give the Swedish manufacturer a big footprint in the world's largest auto market.

For the moment, however, some premium car makers are reporting breath-taking profit increases.

BMW posted a second-quarter net profit of 834 million euros (1.1 billion dollars), compared with 121 million euros in the same period in 2009.

The results shattered the expectations of analysts polled by Dow Jones Newswires, who had forecast profits of 674 million euros.

BMW's operating profit before interest and tax soared to 1.717 billion euros from just 169 million euros and the group reiterated its unit sales forecast of 1.4 million in 2010.

Chief Executive Norbert Reithofer told a telephone press briefing the group would be operating at more than 90 percent capacity this year.

European automakers have been boosted from the euro's fall in value against the dollar which "greatly improves their situation in most of the Asian and North American markets," Dietz noted.

That could also change if the euro remains at about 1.32 dollars or gains in strength later this year.

But Daimler, which owns Mercedes Benz, has raised its core earnings outlook to six billion euros this year while Volkswagen, Europe's biggest car maker and Audi's parent group, plans to sell a record 6.3 million vehicles.

Audi expects to sell more than 200,000 cars in China, and top its 2008 record of one million vehicles worldwide.

Honda reported a record quarterly profit of 3.15 billion dollars as Japanese car sales pursued a year-long upward trend in July, and Peugeot pushed back into the black with a first-half profit of 780 million euros.

Indian carmakers posted robust sales in July as well, in a market forecast to triple over the next decade to six million vehicles.

But Peugeot head Philippe Varin spoke for many when he warned that for the rest of this year "the economic context is clearly going to be less favourable than in the first half.

"Market volumes will show a significant decline in Europe," Varin forecast, and raw material prices are expected to rise.

New car sales in France, Italy and Spain fell sharply in July, the US market is also set for a slowdown, and even searing hot Chinese sales will cool down, experts say.

"We will have to deal with seasonal effects," as the northern hemisphere's summer comes to an end, BMW's Reithofer acknowledged.

© 2010 AFP

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