BMW beat expectations in posting its Q3 earnings, with profits up on the back of the X7 and production zooming up on hybrids. This is ... still BMW, right? All that and more in The Morning Shift for November 3, 2021.
1st Gear: The Only Person I Know Who Wants A BMW Wants An X7
The comedy here is that BMW has always been a “luxury/testing the waters on new technology” company. It’s not like BMW wanted to make the E30 as barebones and archaic as a 1980s sports sedan could be. BMW just couldn’t make the E30 any more luxurious if it tried. Have you ever sat in an ‘80s 7 Series? The most opulent thing in the car is that the seats are electric.
That is to say, it’s not like BMW is having an identity crisis right now. But it is having a moment, with profits up even as sales are down amidst a global chip crisis. That’s because BMW has prioritized high-profit-margin models, as Bloomberg explains:
BMW AG earnings jumped to beat expectations after higher vehicle prices and prioritizing money-spinning models like the $75,000 X7 SUV helped the company offset output reductions due to the dearth of chips.
Group earnings before tax surged 50% to 2.9 billion euros ($3.4 billion) in the third quarter, BMW said Wednesday, compared with an average analysts’ estimate of 2.5 billion euros. The chip supply woes that have hampered the entire industry will remain an issue beyond this year, it said.
[...]
BMW has navigated turmoil from the chip shortage better than others, and in late September went against the tide of warnings to raise profit expectations. While carmakers have been able to offset much of the crisis with higher prices and swinging output toward their most lucrative models, suppliers like Continental AG have been less fortunate.
BMW’s own press release was quick to say that hybrid sales have doubled versus last year, but makes no mention of the X7. According to an earlier release from BMW, X7 sales are up by about 22 percent so far this year.
2nd Gear: Shipping Industry Faces New “Challenge” Of “Wage Inflation”
I would perhaps phrase this “challenge” of having to pay people a fair living wage differently, but I’m not a Bloomberg reporter:
The supply crunch that has dogged the global shipping industry could worsen before it gets better, with new challenges ranging from crew retention to wage inflation.
That’s a warning from executives at Wah Kwong Maritime Transport, a privately owned shipping company based in Hong Kong. They caution that contrasting approaches to containing the virus continues to disrupt the turnover and repatriation of seafarers landing at ports around the world.
“There’s a real squeeze that we’re starting to see in terms of the disappearing applications for seafarers,” William Fairclough, managing director at Wah Kwong, said in an interview. “For certain types of ships, it may become very difficult to actually find the crew and you may get delays because of that. That’s conceivable, it’s never been the case before.”
I really feel for these shipping companies, which seem to be having a hard time exploiting workers like in the good old days of life before the pandemic.
3rd Gear: The Trucks Are Just Sitting There
As for what happens when container ships make it to port, well, there are some issues there, too. Trucks are wasting “50 years in idle time” this year, per Bloomberg:
From the start of 2018 through October this year, idle time per vehicle has increased by 50%, according to data compiled by Lytx Inc., a San Diego, California-based company whose telematics that monitor vehicles are used by 1.4 million drivers worldwide.
So far this year, there is more than a day’s worth of idle time per vehicle, up from 17 hours per vehicle in 2019 and 21.5 hours in 2020. The data found that 50 years in idle time has been wasted this year.
Overwhelming volume generated by pandemic-induced consumer demand is swamping a system that was already creaking under the weight of high demand, low investment, labor shortages and regulatory battles.
I feel like there is nothing more to blame than deregulation in the trucking industry that made everything we buy cheaper and everything about supplying it infinitely worse, but maybe that’s just an axe I’m never going to stop grinding.
4th Gear: It’s A Good Time To Be Making Fast Chargers
Road-tripping in an EV feels like island hopping, traveling from one distant fast charging station to the next. The network of chargers (or rather networks, as evidenced by the four or five different charging apps on my phone) is booming, as is the business of making the chargers themselves. From Bloomberg:
Electric vehicle owners in New York City, many of whom don’t have a driveway or garage where they can plug in, in June got a new place to recharge their cars. Revel, the startup best known for its moped-sharing service, opened a charging depot in a former Pfizer building in Brooklyn. The Superhub, as Revel calls it, has 25 fast chargers built by the Australian manufacturer Tritium, each capable of adding about 100 miles of range in 20 minutes. For Tritium, which specializes in building weatherproof fast chargers for public networks, the Revel installation is part of a boom in U.S. orders.
In May, when the company announced plans to begin trading in the public markets via a merger with the blank-check company Decarbonization Plus Acquisition Corporation II, it had more than 4,400 chargers installed around the globe. Today the number stands at about 5,250, with an increasing share found on roadsides in North America. In May, 70% of the company’s total sales came from Europe; 20% from North America, and the remaining 10% from the Asia Pacific, but that balance has since shifted, according to Tritium chief executive office Jane Hunter, to 45% from Europe and 41% from North America.
I am only mad that chargers don’t look more cool.
5th Gear: Avis Stock Is Going Kerblooey
There is no great way to cover a stock going meme, but Avis is having its own moment just as things are getting weird with Hertz’s Tesla-deal-that-isn’t-inked. From the Financial Times:
A New York hedge fund stands to make billions of dollars on a sudden leap in the shares of Avis Budget, the once ailing rental car company that catapulted like a meme stock after executives discussed adding electric vehicles to their fleet.
SRS Investment Management, which is headed by Karthik Ramakrishna Sarma, is sitting on well over $5bn in potential gains from Tuesday’s share move, according to calculations by the Financial Times. Sarma is an alumnus of Chase Coleman’s hedge fund Tiger Global Management.
Avis’s stock initially surged by more than 200 per cent after executives told analysts on Tuesday that they were considering electric offerings. Joe Ferraro, chief executive, said the company would “be much more active” in electric vehicles.
The discussion came after rental car company Hertz last week said it ordered 100,000 Tesla Model 3 electric sedans, in what was seen as a bellwether announcement for the industry. Late on Monday, Elon Musk, Tesla chief executive, cast doubt on the deal, however.
I love the angle on this FT story. Hell yeah, big profits at a New York hedge fund! Just the news I want to hear.
Reverse: Dog Beats Man
Neutral: What Is The Most BMW BMW?
And why is it the i3?