BMW Group deliveries rise but profits fall and concerns remain about ability to invest
10 March 2017
10 March 2017
BMW Group has announced its lowest profitability since 2010 for 2016, in the year that also saw it lose the premium sales crown to Mercedes.
Its automotive profit margin fell to 8.9% in 2016 from 9.2% a year earlier, due to an unexpected €544 million financing arm-related charge in Q4 and higher spending on next-generation technologies. While this is still a high margin by industry standards, BMW has long argued that its high profitability allows it to make the right investments, despite lacking the financial resources from a larger parent like Mercedes’ Daimler.
To maintain its high profit margin in the face of rising development costs, BMW is focussing on high-margin traditional models, such as the new X7 SUV due in 2018. Sales in 2017 are expected to be ′slightly up’ due to the February launch of its most important model, the BMW 5 Series sedan, and the revamped Mini Countryman.
BMW Group-wide earnings before interest and taxes (EBIT) fell to €9.39 billion, missing analysts’ estimates of €9.82 billion and down 2.2% year on year.
′We are fully focused on implementing our strategy, which involves pivoting to self-driving, electric vehicles,’ chief operating officer Harald Krueger said. ′From 2019 onwards, we will be firmly embedding all-electric, battery-powered mobility in our core brands.’
BMW, which celebrated its 100th anniversary in 2016, is focussing resources on next-generation technologies such as electric vehicles and autonomy rather than short-term sales targets. It is launching the electric, autonomous-enabled iNext in 2021 and is partnering with autonomous tech provider Mobileye and chipmaker Intel as it shifts towards its ′automated, connected, electrified and shared’ mobility plan.