BMW Blames Russian Invasion, As It Lowers Profit Forecast

German car making giant BMW has become the latest to issue a warning about the ongoing chip shortage, and the impact of Russia’s invasion of Ukraine.

Reuters reported BMW Group as saying that it has cut its car division’s 2022 profit margin forecast on Wednesday, and now expects an earnings before interest and taxation (EBIT) margin of 7-9 percent for its car business rather than 8-10 percent, due to the impact of the unfolding Ukraine crisis.

It comes as Tesla raised the prices of its electric vehicles (EVs) for the second time in under a week, amid inflationary pressures impacting the global economy.

BMW warning

Last week CEO Elon Musk warned that Tesla and SpaceX was seeing “significant” inflationary pressure affecting raw materials and logistics.

Musk said that Russia’s invasion of Ukraine has sent commodity prices to their highest level since 2008, he added in a Twitter message, “And we are not alone.”

Toyota meanwhile has announced this week that the global parts shortages, most notably semiconductor shortages, means it will cut its Q2 domestic production target by as much as 20 percent.

BMW meanwhile has said that while it was still able to source some parts from western Ukraine and was engaging suppliers in other locations worldwide to keep up production, further interruptions were to be expected in the coming weeks.

The German carmaker, which sold a record 2.52 million vehicles last year despite semiconductor shortages, had a 10.3 percent EBIT margin for 2021, its highest since 2017.

It had expected to deliver an even higher number of vehicles this year, it was quoted by Reuters as saying, but now expects to be on par with 2021.

BMW said the war in Ukraine made it difficult to give accurate guidance for 2022 and that it could not factor any potential long-term implications into its forecast.

Bleak outlook

In January a leading car industry trade group painted a bleak picture for 2022 and the impact that the ongoing global chip shortage will continue to have during the coming 12 months.

The Society of Motor Manufacturers and Traders (SMMT) said that the chip shortage will continue to hurt British car sales throughout this year and into 2023, after making a serious dent in vehicle supply in 2021.

It comes after the chip shortage already severely impacted global car production during 2020 and 2021.

Last month as Russia’s invasion of Ukraine began, large chip companies said they expected limited supply chain disruption for now from the conflict, thanks to raw material stockpiling and diversified procurement.

Ukraine supplies more than 90 percent of US semiconductor-grade neon, and neon is critical for the lasers used in chipmaking.

The gas, a biproduct of steel manufacturing in Russia, is purified in Ukraine before being exported.