BMW issues profit warning in ‘challenging environment’

by | Mar 21, 2019

BMW has announced that it expects group pre-tax profits to fall by more than 10 percent this year. The automaker said that new technology, currency movements and trade conflicts have all pushed costs up.

Following the annoucement, the BMW Group’s shares dropped almost 5 percent in Frankfurt on Wednesday and left them one of the worst performers on the Stoxx 600 index.

Last week, the BMW Group reported a significant 8.1 percent drop in pre-tax profits for 2018. The group, which also includes Rolls-Royce and Mini, has consequently announced a €12bn cost-saving plan for 2019.

Dr Nicholas Peter, member of BMW’s Board of Management, described the current conditions in the industry as “challenging” and other carmakers are also showing the strain. Volkswagen and Ford have already said that profits will fall this year and Daimler issued two profit warnings in 2018.

Stricter emissions regulations are forcing manufacturers to develop rapidly, investing heavily in cleaner technology. Dr Peter said that the group is currently in the “biggest model offensive in its history”. They are investing billions in “new products, e-mobility, autonomous driving and the next strategic steps for mobility services”.

The trade dispute between the US and China has caused great disruption in the automotive industry, particularly in relation to the cost of shipping vehicles between the US, China and Europe. In addition to this, the cost of raw materials is also rising.

BMW chief, Harald Kreuger, said that the extra costs relating to raw materials and foreign exchange movements would amount to several hundreds of millions of euros.

He added: “At the same time, the ongoing issue of international trade conflicts remains a source of uncertainty.”

Any additional changes to worldwide economic or political conditions – such as a ‘no-deal’ Brexit – could cause profits to fall further still.