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BMW Profitability Hits a Bump

Strong car sales offset by miserable motorcycle results.

by on May.07, 2018

BMW CEO Harald Krueger said the company's recent financial results were impacted negatively by poor motorcycle sales.

The BMW Group’s profits dropped slightly during the first quarter as the company’s motorcycle business took a beating during the first three months of the year offsetting a solid gain by the company’s automotive business.

Harald Krueger, chairman of the Board of Management of BMW AG, said the group is “confident” it can reach projected targets for the current financial year since the international automobile markets will continue their generally upward trend.

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However, the favorable factors are offset by extremely high levels of upfront expenditure for new technologies, fierce competition and rising personnel expenses. The global political and economic environment is expected to remain volatile.

“Our industry is currently going through a phase of unprecedented technological change and must master the highly challenging conditions,” he said.

(Daimler profits drop double digits despite car sales. Click Here for the story.)

BMW's automotive line-up performed well during the last quarter.

“The first quarter highlights some important points: we think in terms of opportunities and are pursuing a well-defined strategy; we are combining tomorrow’s mobility with sustainable profitability – underlined by the fact that we are capable of generating a high pre-tax margin on group level, even in volatile times.”

Group revenues for the three-month period fell by 5.1% to 22.6 billion euros. In 2017, profits before financial results, or EBIT, was also influenced by currency factors and dropped 3% 2.7 billion euros.

First-quarter deliveries of BMW, Mini and Rolls-Royce brand vehicles rose by 3% to 604,629 units. All three major sales regions contributed to the increase. Due to currency effects, this performance was partly due to the financial result, which improved despite the impact of items working in the opposite direction.

At BMW Motorrad, the company’s motorcycle unit, revenue fell by 15.5% to 524 million euros and pre-tax profit dropped 38% for the three-month period amounted to 78 million euros. In the light of slightly slower production ramp-up of new models, retail sales for 2018 are now expected to grow slightly, BMW said.

(Click Here for more about BMW’s new iX3 electric vehicle.)

“The BMW Group was the world’s most profitable car company in 2017 and is stepping up the pace again in 2018. In the opening quarter of the new year, we achieved new best-ever figures for sales volume and net profit and implemented some crucial strategic decisions,” Krueger noted.

Mini gave its original two-door and four-door model as well as the convertible a freshening.

Since the beginning of the year, the BMW Group has taken major steps to implement significant parts of its overall strategy, starting with a letter of intent to establish a joint venture for the local production of all-electric Mini vehicles in China.

One month later, the BMW Group and Daimler AG signed an agreement to merge their mobility services business units. The aim is to merge and strategically expand the range of on-demand mobility services provided in the areas of CarSharing, Ride-Hailing, Parking, Charging and Multimodality.

Last month, BMW Group opened its campus for autonomous driving just outside Munich, where together with partners, it will develop the technologies required for both highly and fully automated driving, and includes new, state-of-the-art working environments now provide space for 1,800 employees.

(For more on BMW’s plans to up EV and AV spending, Click Here.)

The BMW Group recruited about 1,000 people to develop the technologies of the future. IT specialists and software developers in the fields of artificial intelligence, machine learning and data analysis are particularly sought after.

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