Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

BMW has reported higher profit margins in its third quarter on the back of strong demand for its electric cars, bucking malaise in the industry after rivals warned of sluggish demand and a “brutal” price war.

The Munich-based company said operating profit margins in its cars business reached 9.8 per cent in the third quarter, up from 8.9 per cent last year — driven by strong sales of premium cars and electric vehicles, which are more expensive.

BMW said third-quarter sales of its electric cars were up 80 per cent on the same quarter last year, amounting to 15 per cent of all cars sold.

Carmakers are racing to transition away from traditional combustion engines in response to EU plans to phase out new sales of cars fuelled by petrol or diesel by 2035, as well as growing demand in China.

BMW’s buoyant update stood in contrast to warnings from rivals, including Mercedes-Benz, which last week said profits had been hit by a “brutal” price war in electric vehicles amid waning demand. Meanwhile, Porsche warned that luxury goods were not immune to inflation and higher interest rates.

Stuttgart-based Mercedes-Benz and Porsche-owner Volkswagen have both suffered production issues, with a lack of 48-volt batteries curbing sales for the former, while the latter was hit by floods in Slovenia in August.

BMW, on the other hand, said bottlenecks in its supply chain had eased. It sold just over 1.8mn cars in the nine months ending September, up 5 per cent compared with last year.

BMW confirmed its full-year guidance on Friday, sending shares up by nearly 3 per cent in morning trading. It said deliveries jumped significantly in the US, and in Europe 12.9 per cent more cars reached their buyers in the third quarter. It added that those “markets should grow robustly in 2023”.

But the company delivered just under 2 per cent fewer cars to customers in China, its biggest market and the largest for premium cars globally, where it warned potential property company defaults and a weak labour market were all hampering consumer spending.

Increased competition from Chinese electric vehicle start-ups has triggered a price war with western carmakers, at a time when the sector is also facing slowing demand from customers hit with higher interest rates and inflation.

But BMW’s chief executive Oliver Zipse remained bullish, telling reporters that an alternative to competing on price was “having attractive products”.

He added that BMW had recently seen a “very strong increase” in new orders of electric vehicles. “I can only confirm that we’ll maintain our price discipline,” he said.

Carmakers, including BMW, were able to significantly raise prices and boost margins during the pandemic, as shortages of parts such as semiconductors prompted demand to overtake supply.

However, analysts at Citi warned that BMW’s margins were also likely to come under pressure with “interest rates impacting affordability [and] intense price competition, especially in [electric vehicles]”.

Revenues in the nine months ending September hit €122.5bn, up 9 per cent from the year before. Pre-tax profits in the same period fell by nearly a third to €13.4bn, after last year’s figure benefited from a one-off boost from the consolidation of its Chinese joint venture.