US-China trade war hurts BMW profits as it pins hopes on electric cars
BMW's profit before tax dropped dramatically in the third quarter amid challenges in the market and volatile global politics, the company said this morning.
The figures
Third quarter revenues grew by 4.7 per cent to €24.7bn (£21.5bn) compared to the previous year, while deliveries to customers rose modestly by 0.3 per cent.
However, hit by a €400m increase in research costs, profit before tax plummeted to €1.8bn, a 26 per cent reduction year-on-year.
Debt stood at €98bn at the end of the quarter, with €4.6bn cash flow in the year-to-date.
Despite a 9.8 per cent drop in pre-tax profit in the year-to-date, the company has still seen its second best profits ever at €7.9bn.
Why it’s interesting
Facing challenges from the new European emissions-testing standards, the bottom lines of car manufacturers across the continent have suffered in their most recent reports.
BMW, which was among the first to implement the new Worldwide Harmonised Light Vehicle Test Procedure (WLTP) requirements, reduced the number of cars it expected to ship.
Added to this, the manufacturer said Donald Trump’s trade war was “aggravating the market situation and feeding consumer uncertainty”.
Meanwhile, as the group moves to launch three new all-electric models by 2021, and a further seven by around 2025, it has looked to shore up a supply of batteries.
BMW signed €4bn contract with Chinese firm Contemporary Amperex Technology at the beginning of the quarter and last month announced a partnership with battery companies Northvolt and Umicore.
It will also start buying raw materials, such as cobalt, to ensure a steady supply to its battery suppliers.
As the company works to develop electric and autonomous vehicles, research and development costs rocketed to €3.9bn, while capital expenditure was up 2.5 per cent to €2.9bn.
What BMW said
Chairman Harald Kruger said: “Our forward-looking approach has absolute priority. Particularly in these volatile times, we are maintaining our focus on the future and taking the decisions that will lead to tomorrow's success.
“We stand for trust and continuity. The BMW Group has more than 100 years of experience in dealing with transformation and volatility in a rapidly changing world.
“This is why we see challenging conditions as an opportunity to move forward and strengthen our position as market leader. We are implementing our strategy rigorously and investing extensively in the technologies of the future, despite today’s volatile environment.”