The VinFast logo is displayed on a VF5 electric SUV during CES 2022 at the Las Vegas Convention Center in Las Vegas, Nevada, U.S. January 5, 2022.
The VinFast logo is displayed on a VF5 electric SUV during CES 2022 at the Las Vegas Convention Center in Las Vegas, Nevada, U.S. January 5, 2022. Reuters / Steve Marcus

BMW warned on Wednesday of a highly volatile second half as challenges from inflation and gas shortage fears to ongoing supply chain bottlenecks weighed on demand, with higher pricing only partially offsetting lower output.

The premium carmaker stuck to its outlook of 7-9% for the automotive margin and expects a solid sales increase in the second half but said total deliveries will not reach last year's record highs of 2.52 million across the group.

Tightening sanctions on Russia, interruption of gas supply or the possibility of the war in Ukraine spreading were not factored into its forecast, it added.

"BMW is the first manufacturer to signal caution on the demand front," analyst Daniel Roeska of Bernstein Research said in a note on Wednesday. "A warning for year-end 2022 likely implies that BMW is already seeing weakening consumer demand today."

A survey by Germany's Ifo institute on Wednesday showed German carmakers' business situation beginning to deteriorate in July, with order backlogs shrinking and price expectations plummeting.

The Munich-based carmaker struck a more negative tone in its outlook than competitor Mercedes-Benz, which last week raised its earnings outlook for the year as profits and revenues grew in the second quarter despite falling unit sales.

BMW's earnings were down 31% in the second quarter to 3.4 billion euros ($3.46 billion) despite growing revenues, still beating a 3.13 billion euro forecast in a Refinitiv poll of eight analysts.

The consolidation of its China joint venture BMW Brilliance Automotive pushed up revenues in the first half but dampened second quarter earnings, BMW said, reporting an automotive margin of 8.2%, down from last year's 15.8%.

Overall, the reevaluation of the Chinese joint venture shares boosted earnings before tax by 7.7 billion euros in the first half.

BMW increased its stake in its joint venture with Brilliance Auto Group to 75% from 50% in February after securing the necessary license from Beijing to take majority control.

It said at the time the deal would have a positive effect of 7-8 billion euros on the financial results of the automotive business.

($1 = 0.9825 euros)