BMW with record payout after profit increase through increased stake in China JV

BMW will pay out a record €5.5 billion to shareholders after boosting profits from an increased stake in its Chinese joint venture and higher prices for its expensive premium cars.

The German automaker on Thursday proposed a dividend of €8.50 per share, up from €5.80 a year earlier, to let shareholders “share in the success” of its preliminary 2022 results.

The siblings Stefan Quandt and Susanne Klatten, BMW heirs, who own around half of the company and sit on the supervisory board, benefit most from this.

BMW announced last year that it had received permission from Beijing to increase its stake in its €3.7 billion joint venture with Chinese partner Brilliance Auto from 50 percent to 75 percent.

China, with its large and rapidly expanding middle class, has become a key market for German automakers, exposing them to increasing geopolitical tensions between the country and the West.

“For German [carmakers]China accounts for about 40 percent of revenue, so if you’re able to gain control of that business, that’s strategic,” Stifel analyst Daniel Schwarz said.

“Other companies would like to do that,” he added, because if Western companies increase their stakes or take over Chinese joint ventures, approval from Beijing is required.

“The only thing now is that they have the highest exposure to China. So if an investor has a negative view of China then BMW might look riskier.”

Schwarz added that the dividend is “high but no surprise” as it is in line with BMW’s guidance of 30 to 40 percent of net income.

The increased share, together with higher prices for BMW’s premium cars, led to a jump in profits of 46.4 percent to 23.5 billion euros last year. Sales increased by 12 percent to 279 billion euros.

Shortages of chips and other parts over the past year have dampened car sales, with hundreds of thousands almost completed at factories.

Automakers responded by prioritizing more expensive models with higher profit margins, resulting in a record year for the industry.

Competitor Mercedes-Benz’s earnings before interest and taxes rose 28 percent last year to 20.5 billion euros, while Volkswagen last week announced a nearly 10 percent increase in pre-tax profit to 22 billion euros.

Schwarz drew a lukewarm reaction from investors as BMW slightly missed profit margin and strong numbers from Mercedes and VW meant good news was already priced in.

BMW shares, which had risen by almost a third last year, fell by 1 percent to 99.53 euros by the close of trading in Frankfurt on Thursday.