Raid on car inventories: Strong demand from China spurs recovery in Q3.


European automakers BMW and Ferrari recorded strong demand for luxury vehicles in the 3rd quarter
Fiat Chrysler and PSA receive green light from the EU for their $38 billion merger
The Japanese car manufacturers Honda and Toyota recorded robust demand in the third quarter

The strong demand for new vehicles in China has enabled the automotive market to recover faster than expected. Nearly all major car manufacturers exceeded analysts’ expectations for the third quarter and generated a great deal of buying interest.

Robust demand for luxury vehicles helps BMW

BMW (ETR: BMW) increased its third-quarter earnings by 10% as demand in China was stronger than expected. The German giant increased its quarterly profit before taxes by 9.6% to 2.46 billion euros.

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

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

The EBIT margin jumped to 6.7%, up from -10.4% in the previous quarter and 6.6% last year. These strong figures are due to higher deliveries, which rose by 9.8% in the quarter.

The BMW share price closed the week 8.35% higher to compensate for last week’s losses.

Ferrari shares break out higher

The share price of Ferrari (BMV: RACE) rose by over 14%, the best week in several years. The luxury car manufacturer increased its adjusted core result to EUR 1.125 billion in 2020, slightly above the previous range of EUR 1.075-1.125 billion.

“A solid proof that we are now running on all cylinders. We will enter 2021 with a very strong order backlog, we should have a pretty strong year,” said Louis Camilleri, CEO of Ferrari.

At Ferrari, deliveries decreased by 6.5% in the third quarter, although deliveries of the F8 Spider and 812 GTS increased. Read here how to select winning shares.

PSA and FCA receive EU approval

Similar to Ferrari and BMW, the shares of the PSA Group (EPA: UG) increased by almost 7% after the owner of the Peugeot, Citroen and Opel brands recorded sales of 15.45 billion euros in the third quarter, slightly less than 15.58 million euros compared to the previous year.

The French automaker delivered 589,000 vehicles worldwide, with a total inventory of 428,000 vehicles at the end of September.

The PSA Group forecasts a 25% drop in car sales in Europe, 30% in Latin America and 20% and 10% respectively in Russia and China. The automaker said it will continue to give priority to profitability and cash generation.

Reuters reported two weeks ago that Fiat Chrysler (NYSE: FCAU) and PSA will receive the green light from the EU for their $38 billion merger.

Like its partner PSA, Fiat Chrysler returned to profitability due to strong demand for pickup trucks and jeeps. As a result, the company reinstated its full-year earnings forecast, subject to the limited impact of the second pandemic wave.

Available liquidity is estimated at 27.1 billion euros as factories are now operating close to the pandemic.

FCA shares rose 8.54%, the highest level in eight months.

Toyota’s forecast for the full year almost doubled

Toyota Motor Co (T: 7203) reported an operating profit of 506 billion yen (USD 4.9 billion) compared to 662.4 billion yen (USD 6.4 billion) last year. The company has significantly upgraded its full-year operating profit outlook.

“Comparing the second quarter with the first, a dramatic recovery can be seen,” said CEO Kenta Kon.

Toyota now expects full-year operating profit for the fiscal year ending in March 2021 to be 1.3 trillion yen, much higher than the previous forecast of 500 billion yen, but still well below last year’s profit of 2.47 trillion yen. Analysts expected a forecast of 1.25 trillion yen.

“Investors are looking at how Toyota is doing overseas, and with the yen’s appreciation (against the dollar) and a resurgence of coronavirus, we need to be cautious about the (profit forecast) revision,” said Kazuo Kamiya of Nomura Securities.

Honda agrees with Toyota’s results

Similar to its Japanese rival Toyota, Honda Motor Co (T: 7267) increased its full-year operating profit to 420 billion yen (USD 4.05 billion), more than double the previous year’s k


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