Do you expect a good second half despite the chip shortage?
Yes, but it really depends, because we lack a little bit of visibility. If I knew how many chips we would get, I could be more precise because from a customer perspective, we clearly have sufficient demand and sufficient orders in the pipeline.
How much are rising prices for raw materials and foreign exchange rates going to affect your second-half results?
For the full year, I expect an impact in the area of plus or minus half a billion euros for both, with currency being slightly positive in terms of full-year impact. I expect raw materials to be a little bit more negative. But this remains in line with what we announced at the beginning of the year.
Could raw materials price increases force BMW to revise its full-year guidance?
We have some coverage in place, but the farther out you go, the less coverage you have. In the first half we had a slightly smaller impact, about 250 million euros. A slightly bigger impact will come in the second half. Therefore, there is no need for us to adjust our full-year guidance, that is an operating margin between 7 percent and 9 percent. I think we will be in the upper part of the corridor, in the area of about 9 percent.
Do you hedge prices on raw materials or just currencies?
You cannot hedge on all raw materials and all currencies, but those that you can hedge, we do as far as possible. If we can't hedge them on the financial markets, we make medium- and long-term agreements with our suppliers. On the foreign exchanges, we follow a macroeconomic model where we study a currency. Is it overvalued, significantly overvalued, undervalued, significantly undervalued? Depending on where we are, we have shorter or longer hedges and sometimes even zero hedges for a currency.
In terms of financial services, how are delinquency rates evolving?
We look at delinquencies from two angles: financial services and with regard to our suppliers. In both areas we have probably the lowest level ever -- and we were already very low before because we have a very good tool to manage this. If I look at suppliers, we have seen no negative shift at all.
From the pricing point of view, automakers have been benefiting since June 2020 because of strong demand and low inventories. The chip crunch accelerated this already favorable trend. Do you think this could become the new normal?
We have set up a project for how to protect and optimize our supply chain in the future to maintain those low inventory levels, because at the end of the day it's not only us but also our dealers that benefit from this situation. If you look at their margins, they have improved as well. This is something I believe fits to the product and what people expect from a premium brand. So, that is something we will definitely maintain in the future as well.
What is your current inventory level?
Every single market is asking for more cars, which is good news because it means we have managed the supply chain in a way that we have the lowest inventory levels in years. This isn't just the case in one market but across our sales regions. The task is to structure this process in a way that we maintain low inventory levels without losing sales once the semiconductor shortage is resolved.
Long waiting times can push an automaker to offer discounts. How is BMW avoiding this?
In every single market there is a lower discount level. That's the case in Germany, the U.S. and China. A key element in maintaining this is to fine tune the supply chain. I was discussing this with our four biggest U.S. dealer groups earlier this month. In the past the U.S. approach was always to say, "The customer is entering the showroom on Saturday morning at 10:00 a.m. and he wants to leave with a car at 1:00 p.m." Now the same dealers tell me they believe our customers are ready to wait six weeks and are ready to pay a slightly higher price, even if they have to wait. That's something we will implement in a smart way. Of course, the waiting time can't be too long because you will lose sales. But the ordering process mean can make the experience better because the customer creates his own car. This increases customer satisfaction and helps us sell innovative options.