Car industry BMW profit slumps due to weakness in China
Problems with brakes on 1.5 million cars and falling demand in China - the third quarter is a blow to the Munich-based car manufacturer BMW. It wants to make up some ground by the end of the year.
06.11.2024, 08:08
06.11.2024, 12:33
SDA
BMW has suffered a massive slump in profits due to problems with brakes and falling sales figures in China. Group net profit in the third quarter fell by 84 percent to 476 million euros. The share price fell significantly and was one of the biggest losers in the Dax index. CEO Oliver Zipse said: "In the fourth quarter, we are back on course for a stronger result, despite high planned upfront expenditure, in order to achieve our annual targets." The car manufacturer had already revised these downwards in September.
Due to technical problems with brake parts from supplier Continental, BMW has to recall 1.2 million cars and is unable to deliver 320,000 new cars. "That is why we have set aside a high three-digit million sum," said CFO Walter Mertl. The replacement of parts for most of the new cars will be completed by the end of the year. In the current fourth quarter, sales and profits are significantly better, said Mertl.
In China, BMW sales fell by 30 percent to 148,000 cars. This means that BMW now only sells a quarter of its cars there. However, at least half of the drop in sales in China was due to the halt in deliveries because of the brakes, said Mertl. However, BMW is also experiencing subdued demand. Prices are under pressure and are fluctuating strongly. This is likely to continue until the end of the year. BMW is now supporting its dealers with discounts and liquidity.
Tariffs in view
With regard to possible US tariffs on cars from Europe, Zipse was relaxed: The second largest BMW plant worldwide is the SUV factory in Spartanburg. Most BMW cars sold in the USA are produced in the USA.
At the same time, Zipse criticized the punitive tariffs planned by the EU for Chinese electric cars. The fact that the EU is restricting free trade is a "shot in the foot" because it is slowing down the ramp-up of e-mobility in Europe and could also lead to countermeasures. Although BMW no longer imports the electric SUV iX3 from China to the EU, it does import the new electric Mini models Cooper and Aceman.
Annual targets confirmed
Overall, Group sales fell by 13 percent to 541,000 cars in the third quarter. Turnover shrank by 16 percent to 32.4 billion euros, while earnings before interest and taxes (EBIT) fell by 61 percent to 1.7 billion euros. At 2.3 percent, the EBIT margin in the car division, i.e. the portion of sales that remains as operating profit, remained far below the company's own targets.
For the year as a whole, BMW expects a slight decline in sales, an EBIT margin of 6 to 7 percent and a significant drop in profit before tax. Last year, BMW sold 2.55 million cars, achieved an EBIT margin of 9.8 percent and generated a pre-tax profit of 17.1 billion euros.
Growth driver e-car
Battery-powered cars (BEV) continue to be a growth driver for BMW - in contrast to other car manufacturers. The Group now has 15 fully electric models on offer, sells 17 percent of its cars as battery-powered vehicles (BEV) and expects "another significant increase" next year. Pre-series production of the first "New Class" SUV car with all-new electric drives and comprehensive digitalization has begun at the new Hungarian plant in Debrecen, assembly of the first saloon is being prepared at the main plant in Munich, pre-series production of the "New Class" electric motor housings has started at the Landshut plant and the battery plant is being built in Irlbach-Strasskirchen in Lower Bavaria.
