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VW vs BMW

July 17, 2023
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Battle of the Car Brands. We are taking it to the streets, as we welcome Euro Stoxx to EasyEquities.

 

I thought I would start with two EURO brands that I love more than so many other things. The question is not which one will I drive next, but which one will I put into my portfolio?

 

VOLKSWAGEN

Volkswagen manufactures and sells automobiles primarily in Europe, North America, South America, and the Asia-Pacific. The company operates in four segments:

  1. Passenger Cars and Light Commercial Vehicles
  2. Commercial Vehicles
  3. Power Engineering
  4. Financial Services

 

The Passenger Cars and Light Commercial Vehicles segment develops vehicles, engines, and vehicle software and light commercial vehicles and produces and sells passenger cars and related parts.

 

The Commercial Vehicles segment develops, produces, and sells trucks and buses and offers parts and related services.

 

The Power Engineering segment offers large-bore diesel engines, turbomachinery, and propulsion components.

 

The Financial Services segment provides dealer and customer financing, leasing, banking and insurance, fleet management, and mobility services. The company also offers motorcycles.

 

It provides its products under the Volkswagen, Audi, KODA, SEAT, Bentley, Porsche, Scania, MAN, Lamborghini, Ducati, and Bugatti brands. Volkswagen AG operates as a subsidiary of Porsche Automobil Holding SE.

 

The good news

VW has some amazing brands under their umbrella, and they are making real progress on all-electric vehicles. By March 2022 the share of all-electric vehicles made up 5.2% of all the Groups total deliveries. That is a 108% increase from the prior year.

 

1.898 million vehicles delivered in Q1 of 2022

  • VW = 1.198 million
  • Audi = 385 thousand
  • SKODA = 186 thousand
  • SEAT = 91 thousand
  • Porsche = 68 thousand

 

Some exciting brand news include

  • The world premiere of the all-electric VW ID Buzz. A full charge gets you over 330km. A nippy little addition to the VW family
  • Audi launched the new version of the flagship A8. It is near production and excitement is brewing properly under Audi enthusiasts
  • Porsche expanded the Taycan model range with the Taycan Sport Turismo
  • Scania unveiled the enhanced Interlink city bus

 

VW strengthened their existing partnership with the Ford Motor Company by signing a further agreement for e-mobility and autonomous driving. This partnership gives VW access to the USA and Ford access to Europe for this competitive, yet very lucrative space.

 

The net profit after tax was up a whopping 97% from Q1 2021 to Q1 2022. A large percentage of this gain was due to the financial services division that makes profits on derivatives. This is thus not cash, but accounting profits. We know, cash is king.

 

The bad news

Deliveries were down 21.9% from Q1 2021 to Q1 2022.

 

Revenue was only up 0.6% from Q1 2021 to Q1 2022. The current global uncertainty has a material impact on car sales. People are scared and keep their vehicles for longer.

 

Covid-19 still had a huge impact on VW sales, especially in China where Omicron was still spreading during Q1 of 2022.

 

The Russia-Ukraine conflict had a material negative impact on input costs. The parts supply shortage of 2021 was made worse by the conflict in Ukraine.

 

BAYERISCHE MOTOREN WERKE

BMW develops, manufactures, and sells automobiles and motorcycles, and spare parts and accessories worldwide. It operates through

  1. Automotive
  2. Motorcycles
  3. Financial Services

 

The Automotive segment is involved in the development, manufacture, assembling, and sale of automobiles, spare parts, accessories, and mobility services under the BMW, MINI, and Rolls-Royce brands. This segment sells its products through independent and authorized dealerships.

 

The Motorcycles segment develops, manufactures, assembles, and sells motorcycles and scooters under the BMW Motorrad brand name, as well as spare parts and accessories.

 

The Financial Services segment engages in automobile leasing, retail and dealership financing, multi-brand fleet, customer deposit, and insurance activities and the provision of fleet management services under the Alphabet brand. The company was founded in 1916.

 

The good news

BMW is also an exceptionally strong brand and their progress in all-electric vehicle sales far exceed that of VW. In Q1 of 2022 15% of their total deliveries were all-electric. This was up 36% from the 2021 number. BMW is clearly making progress, but VW is trying to catch up. The highly innovative BMW iX2 & BMW i42, which first went on sale at the end of the previous financial year, are spearheading the BMW Groups push towards electric mobility and enjoying strong demand. Both vehicles will be launched on markets worldwide over the coming months. The BMW iX32 and the MINI SE2 also accounted for a significant share of the broad growth in electrified vehicle sales. In the course of the financial year 2022, the all-electric BMW i72 luxury sedan and the BMW iX12 will be added to the BMW Groups all-electric product range. Watch these closely. BMW is serious about the EV game.

 

596,907 vehicles delivered in Q1 of 2022

  • BMW = 519,796
  • MINI = 75,487
  • Rolls-Royce = 1,624

 

BMW has performed exceptionally well in Q1 of 2022, with:

  • Group Revenues up 16%
  • Profits were up 260%. This mainly was due to the first time they brought in the results of a new subsidiary called BMW Brilliance. Brilliance manufactures BMW brand models primarily for the Chinese market at its two vehicle production plants as well as petrol engines and high-voltage batteries at a separate facility.

 

The bad news

Just like with VW, despite full order books, global supply bottlenecks for parts meant that customer demand could not be met in full. The situation was also exacerbated by the spread of coronavirus, to which China reacted with the introduction of stringent countermeasures and a renewed lockdown.

 

The outbreak of war in Ukraine in the first quarter 2022 represented a further risk factor for operations. BMW Group achieved production volumes of 541,7761 units between January and March (2021: 669,1181 units 19.0 %)

 

WHO WINS THIS RACE?

Please refer to the attached summary table. BMW clearly has the stronger numbers in terms of deliveries, financials and dividends. Both shares performed dismally over the past 5 years. The one question you need to ask yourself is, who has the stronger growth potential and management team to pull it off?

 

Full Disclaimer: I own VW shares at the time of writing.

 

Disclaimer: Nothing in this article should be seen as financial advice. Everything stated is for educational purposes. Only opinions are expressed.


 


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