BMW's Profits Hit by Electric Vehicle and Emissions Costs

Date : 08/01/2019 @ 10:00AM
Source : Dow Jones News
Stock : Bayerische Motoren Werke AG (BMW)
Quote : 44.75  -0.115 (-0.26%) @ 4:35PM
Bayerische Motoren Werke share price Chart

BMW's Profits Hit by Electric Vehicle and Emissions Costs

Bayerische Motoren Werke (XE:BMW)
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By William Boston 

BERLIN -- BMW AG, the German luxury car maker, said its second-quarter net earnings tumbled 29%, hit by exchange rate fluctuations and manufacturing costs for electric vehicles.

The Munich-based maker of BMW, Mini and Rolls-Royce brands is under pressure as auto markets weaken amid trade tensions and a slowing world economy. Like other manufacturers, BMW is also stepping up investment to meet tougher European greenhouse gas emissions targets that take effect next year, or face billions in fines.

BMW's net profit in the three months to the end of June fell to EUR1.45 billion ($1.6 billion) from EUR2.05 billion the year before. Revenues rose 2.9% to EUR25.7 billion. New car sales in the quarter rose 1.5% to 647,504 vehicles, slowed by weaker sales in Europe and the U.S., although BMW bucked the downward trend in China and achieved a 24% increase in sales there.

BMW said Thursday the weaker earnings reflected EUR1.4 billion in development costs associated with stepping up manufacturing of electric and hybrid vehicles, higher production costs, unfavorable exchange rates, higher raw materials prices, and pressure on pricing due to "fierce competition" in many markets.

"We are consistently expanding e-mobility with all-electric vehicles and plug-in hybrids and continuing to optimize our already economical combustion engines. Moreover, we are also investing in new technologies such as the fuel cell," Harald Krüger, the outgoing chief executive, said.

BMW's core automotive division came under significant pressure in the second quarter and earnings in the unit are well below the previous year so far. With global auto markets under pressure, BMW cut global auto production by 4.6% in the second quarter, a reflection of softening global demand.

BMW reported a 67% drop in automotive division earnings before interest and taxes to EUR1.5 billion in the six months to the end of June and a decline in its automotive pretax profit margin to 2.8% from 9.2% the previous year.

Growth in new car sales during the first half of the year was muted. The BMW brand achieved strong sales growth of its i3 electric city car and its popular X3 and X4 sport-utility vehicles in the first six months of the year. However, most of its other models, including its flagship 5-Series and 7-Series sedans, reported declining sales.

Write to William Boston at william.boston@wsj.com

 

(END) Dow Jones Newswires

August 01, 2019 04:45 ET (08:45 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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