BMW's Profits Hit by Electric Vehicle and Emissions Costs
August 01 2019 - 5:00AM
Dow Jones News
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)
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