BMW profits slump

BMW has reported that its profit dropped by 27 per cent in the third quarter of 2018.

In a statement, the German premium car-maker blamed currency fluctuations, raw material costs, the high cost of electric- and autonomous-vehicle R&D and US president Donald Trump’s trade wars for the fall in profit.

Its profit fell to €1.75 billion, despite a small lift in its sales, so its operating margin was squeezed from 2017’s 8.6 per cent for the third quarter to just 4.4 per cent.

BMW’s target window for profit margin is between eight and 10 per cent, but it wasn’t shocked by the fall, insisting it will slash costs to offset its expenses in EV and lower-emission new models this year and next.

"Along with the rest of the industry, we are increasingly confronted with adverse external factors, the negative impact of which cannot be fully offset," BMW’s Chief Financial Officer, Nicolas Peter, said. (pictured)

BMW has already slashed its profit guidance for the year, with Peter insisting that “Additional measures would be needed to support our profitability targets.”

Peter also pointed a finger at the Trump government’s trade war with China as a destabilising influence around the world.

“The trade dispute between the US and China is straining the global economy,” Peter admitted.

“With different production locations worldwide, not all competitors are equally affected. The volatile trade situation also unsettled customers in the third quarter.

“As you know, the BMW Group remains committed to free trade and open markets. Our global presence enables us to remain agile and flexible. More than ever, we are looking at different scenarios and are taking advantage of opportunities in the major regions.”

The most surprising shortfall in BMW’s predictions was perhaps expected to be one of its strengths.

It long ago ensured that the majority of its biggest-selling models were certified for the new Worldwide Harmonized Light Vehicles Test Protocol (WLTP), in which BMW, Audi and Volkswagen were all caught short with some critical models.

But the leap ahead in Europe never came as rivals preferred to attack with discounted pricing for the models they could sell instead of being defensive.

Volkswagen, Audi and Daimler all threw as many cars at the market as they could before the WLTP became into effect in September, gorging on an extra 100,000 cars across the continent, but leading to a relative famine in September and October.

“The WLTP transition has thrown the European market completely off balance,” Peter insisted.

“We had our vehicles certified early, ahead of the deadline – but have still not been able to isolate ourselves from the overall market development.

“We made a conscious decision early on not to follow every price war. The BMW Group responded immediately to these changes, and we adjusted our production volumes accordingly.

“Thanks to this careful planning, we were able to reduce our inventories by nearly 20,000 units in the third quarter.”