Saturday 25 November 2017

BMW barometer predicts the cold snap is here to stay

Nick Webb: The most powerful Briton in the auto industry tells Nick Webb how BMW sees the recovery coming

Nick Webb

Nick Webb

IF you want to find out how the economy is going to perform, have a look at your local BMW dealer.

If he's got a sweaty top lip, then it's time to stock up on tinned foods as things are going to get messy. If he's all happy and smiley, then the future is bright.

Sales of BMWs are a very accurate barometer for economic growth and consumer confidence. After all, if you're about to lash out 100 grand on a new motor, you'd need to be pretty optimistic about your future income.

"In a nutshell, we think that Europe is going to remain tough," BMW board member Ian Robertson told the Sunday Independent last week. Robertson, described as the "most powerful Brit in the global auto industry", is also the chairman of BMW's Rolls Royce unit.

"What was and still is a difficult set of circumstances in southern Europe has now moved north. France is a difficult market, Germany is flatlining or going backwards slightly. Belgium and the Netherlands had a good run, but that was because of taxation policies there that have come to an end. So Europe remains tough. If it remains flat, that would be a great result but it's probably going to come back a little," said Robertson.

At one stage during the boom years, it was said that the Irish drove more BMWs per capita than almost anywhere else on the planet. Other than Bavaria obviously. Even so, the Irish market is small by BMW measures and has been hit hard by the downturn. But Robertson is positive about a future Irish recovery.

"I think that the fiscal policies that the Irish Government adopted – and they were quite brutal – you took a lot of hard measures and did the restructuring of the banks which involved a lot of pain. I think the Irish consumer is a young consumer as the economy had grown quite rapidly but I always think the Irish consumer is quite optimistic, so it does seem as if Ireland is recovering. But it is a small market for us," he said.

Given that Ireland's recovery depends to a great extent on export markets, BMW's views on the global economy carry real clout.

"I think the headwinds remain this year and they will remain next year," Robertson said. "But will it be a uniform recovery? I think some countries will come back stronger than others. The surprising thing is that the UK is still strong.

"Look at the south of Europe, look at Spain. It was a market of 1.7m cars. Now it's 690,000 and it's down another 10 per cent in the first two months of the year."

He added: "What will Spain be like in five years? It's not easy to work out. Consumer confidence has to come back."

BMW may be bucking the trend across Europe, which saw new passenger registrations in the EU drop by 10.5 per cent in February compared with the same period last year. The Netherlands, France and Italy saw sales tanks but Greece and Portugal actually saw an increase in new cars for the first time since the crisis hit. The German car-maker recovered extremely strongly from the financial crisis fuelled by Asian demand. China's growth is the biggest issue. BMW sold another 80,000 cars in China last year. "On one year in China, we added more than Spain or Italy combined," he said. South Korea is "strong", Japan has "recovered well after the tsunami", Australia is still buoyed by its raw material boom, South America is "OK but volatile". The BMW executive also believes that the US is "in reasonable shape for more growth".

The clear message coming out from the German car-maker is that while parts of Europe will start to recover over the next two-plus years, the real engine for growth is Asia. There are two billion Chinese, and an awful lot of them want to drive flashy motors.

Last year BMW returned pre-tax profits of €7.8bn – buoyed by a billion euro gain from currency fluctuations.

BMW boss Norbert Reithofer said last week that the company's pre-tax profits would stagnate this year because of sales pressure in Europe and the costs of investing in new motors like its i3 electric car. "The global financial environment is both uncertain and volatile," he warned. However, despite this, BMW is aiming to smash all records for selling new cars this year fuelled by Asian demand.

Earlier this month, Reithofer told journalists at the Geneva motor show that he believed that the European car market would remain volatile for another five years.

The engine of even the most finely tooled German car-maker may splutter in Europe for some time yet. But that doesn't mean that it's not going to start purring again.

Irish Independent

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