BMW Earning A Ton Of Money From SUVs

One of the key reasons why BMW's board replaced now-former CEO Harald Krueger with Oliver Zipse last summer was because of his failure to meet sales expectations. The fact that Krueger was also late to the game with electric vehicles didn't help him either. Both Audi and Mercedes-Benz beat BMW to market with the e-tron and EQC, respectively. Expectations are understandably high for Zipse, but Reuters reports he's already off to a solid start. Ironically enough, he has Krueger to partially thank. BMW has reported a 33 percent third-quarter operating profit thanks mainly to excellent SUV sales.

Another factor that worked in the German automaker's favor last quarter was the absence of "one-off factors." These include things like a natural disaster in a key market. Partially as a result of third-quarter sales, BMW is "well on (its) way to achieving (its) targets for the year as a whole," Zipse said.

What's interesting is that, unlike Ford, BMW's China sales have remained solid. While the Blue Oval brand was forced to lower its sales forecast because of China, BMW is reporting the opposite. BMW passenger car sales increased by an impressive 3.6 percent last quarter, and this includes a 5.8 percent increase in China alone. The redesigned X3 played a significant role.

For the past 15 months, auto sales in China have fallen but BMW seems to be weathering the storm quite well. US sales also remain very good. Compared to the same time in 2018, BMW of North America reported a 3.3 percent increase last month. Ford, meanwhile, was down by 3.8 percent. Many analysts have concluded that North American auto sales, in general, are cooling off but are not dropping at the level China has experienced.

With this sales momentum, led mainly by its SUVs, BMW plans to invest profits, alongside cuts made elsewhere, into re-tooling its factories to build hybrid and electric vehicles. Cutting vehicle development times by a third and the overall number of global drivetrains by half beginning in 2021 are also planned. For now, ironically enough, the X3 and gas guzzlers like the X5 and big X7 continue to fund BMW's more environmentally friendly future plans.